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Bilateral adjustment of bank assets: Boom and bust

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  • Mehigan, Caroline

Abstract

This paper provides evidence that bilateral factors were relevant for the adjustment of bank assets before and during the Great Recession. This finding is consistent with the theory that monitoring costs or informational frictions can help explain the adjustment of bank assets at a bilateral country level. Distance is a particularly relevant friction, and has non-uniform effects for advanced and emerging hosts. If the assets are denominated in domestic rather than foreign currency, this can reduce the negative effect of distance on adjustment. Further we find that trade, colonial ties and the history of a position are important for the bilateral adjustment of bank assets.

Suggested Citation

  • Mehigan, Caroline, 2018. "Bilateral adjustment of bank assets: Boom and bust," Emerging Markets Review, Elsevier, vol. 36(C), pages 144-158.
  • Handle: RePEc:eee:ememar:v:36:y:2018:i:c:p:144-158
    DOI: 10.1016/j.ememar.2018.04.004
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    Cited by:

    1. Rogelio Mercado Jr., 2018. "Bilateral Capital Flows: Transaction Patterns and Gravity," Working Papers wp30, South East Asian Central Banks (SEACEN) Research and Training Centre.

    More about this item

    Keywords

    Cross-border banking; Bilateral-banking; Financial crises;

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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