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Foreign Banks and Credit Stability in Central and Eastern Europe: Friends or Foes? A Panel Data Analysis

  • Ralph de Haas
  • Iman van Lelyveld

We study whether foreign and domestic banks in Central and Eastern Europe have reacted differently to business cycle conditions and host country banking crises. Our unique panel dataset comprises data of more than 300 banks for the period 1993-2000, with detailed information on bank ownership. Our analysis shows that during crisis periods domestic banks contracted their credit and deposit bases, whereas foreign banks did not. Also, home country conditions matter for foreign bank growth, as there is a significant and negative relationship between home country economic growth and host country credit by foreign banks.

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File URL: http://www.dnb.nl/binaries/ms2003-04_tcm46-147334.pdf
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Paper provided by Netherlands Central Bank, Monetary and Economic Policy Department in its series MEB Series (discontinued) with number 2003-04.

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Date of creation: Jun 2003
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Handle: RePEc:dnb:mebser:2003-04
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  1. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
  2. Linda S. Goldberg, 2001. "When is U.S. bank lending to emerging markets volatile?," Staff Reports 119, Federal Reserve Bank of New York.
  3. Ralph de Haas & Iman van Lelyveld, 2002. "Foreign Bank Penetration and Private Sector Credit in Central and Eastern Europe," International Finance 0209002, EconWPA.
  4. Jeremy C. Stein, 1995. "Internal Capital Markets and the Competition for Corporate Resources," NBER Working Papers 5101, National Bureau of Economic Research, Inc.
  5. Joe Peek & Eric S. Rosengren, 2000. "Implications of the globalization of the banking sector: the Latin American experience," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 44(Jun), pages 145-185.
  6. Bank for International Settlements, 2003. "Guide to the international banking statistics," BIS Papers, Bank for International Settlements, number 16.
  7. Linda Goldberg & B. Gerard Dages & Daniel Kinney, 2000. "Foreign and Domestic Bank Participation in Emerging Markets: Lessons from Mexico and Argentina," NBER Working Papers 7714, National Bureau of Economic Research, Inc.
  8. Damien Neven, 2002. "Bank Performance in Transition Economies," IHEID Working Papers 07-2002, Economics Section, The Graduate Institute of International Studies.
  9. Gerard Caprio & Patrick Honohan, 2008. "Banking Crises," Center for Development Economics 2008-09, Department of Economics, Williams College.
  10. Claessens, Stijn & Demirguc-Kunt, Asl[iota] & Huizinga, Harry, 2001. "How does foreign entry affect domestic banking markets?," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 891-911, May.
  11. Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-98, November.
  12. Miller, Merton, 1998. "Asian financial crisis," Japan and the World Economy, Elsevier, vol. 10(3), pages 355-358, July.
  13. Peek, Joe & Rosengren, Eric S, 1997. "The International Transmission of Financial Shocks: The Case of Japan," American Economic Review, American Economic Association, vol. 87(4), pages 495-505, September.
  14. Williams, Barry, 1997. " Positive Theories of Multinational Banking: Eclectic Theory versus Internalisation Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 11(1), pages 71-100, March.
  15. Serge Jeanneau & Marian Micu, 2002. "Determinants of international bank lending to emerging market countries," BIS Working Papers 112, Bank for International Settlements.
  16. Hermes, Niels & Lensink, Robert, 2001. "The impact of foreign bank entry on domestic banking markets: a note," Research Report 01E62, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  17. Houston, Joel & James, Christopher & Marcus, David, 1997. "Capital market frictions and the role of internal capital markets in banking," Journal of Financial Economics, Elsevier, vol. 46(2), pages 135-164, November.
  18. Jennifer S. Crystal & B. Gerard Dages & Linda S. Goldberg, 2002. "Has foreign bank entry led to sounder banks in Latin America?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 8(Jan).
  19. Yongil Jeon & Stephen Miller, 2005. "Performance of Domestic and Foreign Banks: The Case of Korea and the Asian Financial Crisis," Global Economic Review, Taylor & Francis Journals, vol. 34(2), pages 145-165.
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