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The impact of foreign banks on monetary policy transmission during the global financial crisis of 2008-2009: Evidence from Korea

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  • Jeon, Bang Nam

    () (School of Economics)

  • Lim, Hosung

    (Economic Research Institute)

  • Wu, Ji

    () (Department of Economics)

Abstract

This paper examines the impact of foreign banks on the monetary policy transmission mechanism in the Korean economy during the period from 2000 to 2012, with a specific focus on the lending behavior of banks with different types of ownership. Using the bank-level panel data of the banking system in Korea, we present consistent evidence on the buffering impact of foreign banks, especially foreign bank branches including U.S. bank branches, on the effectiveness of the monetary policy transmission mechanism in Korea from the bank-lending channel perspective during the period of the global financial crisis of 2008-2009. One of the underlying reasons for the buffering effect of foreign bank branches is the existence of internal capital markets operated by multinational banks to overcome capital market frictions faced when the foreign banks finance their loans.

Suggested Citation

  • Jeon, Bang Nam & Lim, Hosung & Wu, Ji, 2014. "The impact of foreign banks on monetary policy transmission during the global financial crisis of 2008-2009: Evidence from Korea," School of Economics Working Paper Series 2014-7, LeBow College of Business, Drexel University.
  • Handle: RePEc:ris:drxlwp:2014_007
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    References listed on IDEAS

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    Cited by:

    1. Nasha Ananchotikul & Dulani Seneviratne, 2015. "Monetary Policy Transmission in Emerging Asia: The Role of Banks and the Effects of Financial Globalization," PIER Discussion Papers 7., Puey Ungphakorn Institute for Economic Research, revised Nov 2015.
    2. Balcilar, Mehmet & Kutan, Ali M. & Yaya, Mehmet E., 2017. "Testing the dependency theory on small island economies: The case of Cyprus," Economic Modelling, Elsevier, vol. 61(C), pages 1-11.

    More about this item

    Keywords

    foreign banks; monetary policy transmission; financial crisis;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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