Macroeconomic Shocks and Foreign Bank Assets
AbstractChanges in foreign asset holdings are one channel through which agents adjust to macroeconomic shocks. In this paper, we test whether foreign bank assets change as a result of domestic and foreign macroeconomic shocks. We frame our empirical analysis in a standard new open economy macro model in which financial markets are imperfectly integrated. We test the implications of this model using dynamic panel models for changes in foreign bank assets. We find evidence that nominal interest rate differentials and inflation differentials drive changes in foreign bank assets permanently, while growth rate differentials and exchange rates have only a temporary effect.
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1254.
Length: 40 pages
Date of creation: Jun 2005
Date of revision:
international banking; macroeconomic shocks;
Find related papers by JEL classification:
- F3 - International Economics - - International Finance
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-09-11 (All new papers)
- NEP-FMK-2005-09-11 (Financial Markets)
- NEP-IFN-2005-09-11 (International Finance)
- NEP-MAC-2005-09-11 (Macroeconomics)
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- Ivanka Petkova, 2009. "Attempts of the European Union to Conteina the Financial Crisis," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 119-135.
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