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Macroeconomic Shocks and Banks' Foreign Assets

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  • CLAUDIA M. BUCH
  • KAI CARSTENSEN
  • ANDREA SCHERTLER

Abstract

Recent developments in international financial markets have highlighted the role of banks in the transmission of shocks across borders. We employ dynamic panel methods for a sample of OECD countries to analyze whether banks' foreign assets react to macroeconomic shocks at home and abroad. We find that banks reduce their foreign assets in response to a relative increase in domestic interest rates, and they increase their foreign assets when the growth rate of world energy prices rises. The responses are characterized by a temporal overshooting and a dynamic adjustment process that extends over several quarters. Copyright (c) 2010 The Ohio State University.

Suggested Citation

  • Claudia M. Buch & Kai Carstensen & Andrea Schertler, 2010. "Macroeconomic Shocks and Banks' Foreign Assets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(1), pages 171-188, February.
  • Handle: RePEc:mcb:jmoncb:v:42:y:2010:i:1:p:171-188
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    1. Pontines, Victor & Siregar, Reza Y., 2014. "How should we bank with foreigners? An empirical assessment of lending behavior of international banks to six East Asian economies," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 552-568.
    2. Gropp, Reint & Radev, Deyan, 2017. "International banking conglomerates and the transmission of lending shocks across borders," SAFE Working Paper Series 175, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
    3. Müller, Oliver & Uhde, André, 2013. "Cross-border bank lending: Empirical evidence on new determinants from OECD banking markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 23(C), pages 136-162.
    4. Cerutti, Eugenio, 2015. "Drivers of cross-border banking exposures during the crisis," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 340-357.
    5. Nave, Juan M. & Ruiz, Javier, 2015. "Risk aversion and monetary policy in a global context," Journal of Financial Stability, Elsevier, vol. 20(C), pages 14-35.
    6. Fratianni, Michele & Marchionne, Francesco, 2017. "Bank asset reallocation and sovereign debt," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 47(C), pages 15-32.
    7. Nikolaos Antonakakis & Johann Scharler, 2010. "The Synchronization of GDP Growth in the G7 during U.S. Recessions. Is this Time Different?," Economics working papers 2010-05, Department of Economics, Johannes Kepler University Linz, Austria.
    8. Stefan Avdjiev & Patrick McGuire & Philip Wooldridge, 2015. "Enhancements to the BIS international banking statistics," IFC Bulletins chapters,in: Bank for International Settlements (ed.), Indicators to support monetary and financial stability analysis: data sources and statistical methodologies, volume 39 Bank for International Settlements.
    9. Agnello, Luca & Dufrénot, Gilles & Sousa, Ricardo M., 2015. "Nonlinear effects of asset prices on fiscal policy: Evidence from the UK, Italy and Spain," Economic Modelling, Elsevier, vol. 44(C), pages 358-362.
    10. Beatriz de Blas & Katheryn Russ, 2010. "FDI in the Banking Sector," Working Papers 108, University of California, Davis, Department of Economics.
    11. Stijn Claessens, 2006. "Competitive Implications of Cross-Border Banking," World Scientific Book Chapters,in: Cross-Border Banking Regulatory Challenges, chapter 11, pages 151-181 World Scientific Publishing Co. Pte. Ltd..
    12. Herrmann, Sabine & Mihaljek, Dubravko, 2010. "The determinants of cross-border bank flows to emerging markets: New empirical evidence on the spread of financial crises," Discussion Paper Series 1: Economic Studies 2010,17, Deutsche Bundesbank.
    13. Kalemli-Ozcan, Sebnem & Papaioannou, Elias & Perri, Fabrizio, 2013. "Global banks and crisis transmission," Journal of International Economics, Elsevier, vol. 89(2), pages 495-510.
    14. Tagkalakis, Athanasios, 2011. "Fiscal policy and financial market movements," Journal of Banking & Finance, Elsevier, vol. 35(1), pages 231-251, January.
    15. Tagkalakis, Athanasios, 2011. "Fiscal adjustments and asset price changes," Journal of Macroeconomics, Elsevier, vol. 33(2), pages 206-223, June.
    16. Sven Blank & Claudia M Buch, 2007. "International bank portfolios: short- and long-run responses to the business cycle," CGFS Papers chapters,in: Bank for International Settlements (ed.), Research on global financial stability: the use of BIS international financial statistics, volume 29, pages 128-155 Bank for International Settlements.
    17. Victor Pontines & Reza Siregar, 2012. "How Should We Bank With Foreigners? An Empirical Assessment of Lending Behaviour of International Banks to Six East Asian Countries," CAMA Working Papers 2012-04, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    18. Gropp, Reint E. & Radev, Deyan, 2017. "International banking conglomerates and the transmission of lending shocks across borders," IWH Discussion Papers 19/2017, Halle Institute for Economic Research (IWH).

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