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

  • Jeon, Bang Nam

    ()

    (School of Economics)

  • Lim, Hosung

    (Economic Research Institute)

  • Wu, Ji

    ()

    (Department of Economics)

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.

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File URL: http://dl.dropboxusercontent.com/u/162210677/RePEc/drx/wpaper/LeBow%20College%20of%20Business%20Working%20Paper%202014-7.pdf
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Paper provided by LeBow College of Business, Drexel University in its series School of Economics Working Paper Series with number 2014-7.

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Length: 31 pages
Date of creation: 01 May 2014
Date of revision:
Handle: RePEc:ris:drxlwp:2014_007
Contact details of provider: Web page: http://www.lebow.drexel.edu/

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  1. Hossain, Mahmud & Jain, Pankaj K. & Mitra, Santanu, 2013. "State ownership and bank equity in the Asia-Pacific region," Pacific-Basin Finance Journal, Elsevier, vol. 21(1), pages 914-931.
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  15. Gambacorta, Leonardo, 2005. "Inside the bank lending channel," European Economic Review, Elsevier, vol. 49(7), pages 1737-1759, October.
  16. Jeon, Bang Nam & Olivero, María Pía & Wu, Ji, 2013. "Multinational banking and the international transmission of financial shocks: Evidence from foreign bank subsidiaries," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 952-972.
  17. Nicola Cetorelli & Linda S. Goldberg, 2010. "Global Banks and International Shock Transmission: Evidence from the Crisis," NBER Working Papers 15974, National Bureau of Economic Research, Inc.
  18. Jeremy C. Stein & Anil K. Kashyap, 2000. "What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?," American Economic Review, American Economic Association, vol. 90(3), pages 407-428, June.
  19. Jeon, Bang Nam & Olivero, María Pía & Wu, Ji, 2011. "Do foreign banks increase competition? Evidence from emerging Asian and Latin American banking markets," Journal of Banking & Finance, Elsevier, vol. 35(4), pages 856-875, April.
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