Federal Reserve Bank of Boston
What are the consequences of global banking for the international transmission of shocks?: a quantitative analysis
The global financial crisis of 2008 was followed by a wave of regulatory reforms that affected large banks, especially those with a global presence. These reforms were reactive to the crisis. In this paper we propose a structural model of global banking that can be used proactively to perform counterfactual analysis on the effects of alternative regulatory policies. The structure of the model mimics the US regulatory framework and highlights the organizational choices that banks face when entering a foreign market: branching versus subsidiarization. When calibrated to match moments from a sample of European banks, the model is able to replicate the response of the US banking sector to the European sovereign debt crisis. Our counterfactual analysis suggests that pervasive subsidiarization, higher capital requirements, or ad hoc policy interventions would have mitigated the effects of the crisis on US lending.
Cite this item
Jose Fillat & Stefania Garetto & Arthur V. Smith, What are the consequences of global banking for the international transmission of shocks?: a quantitative analysis, Federal Reserve Bank of Boston, Working Papers 18-11, 01 Oct 2018.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
Keywords: global banks; banking regulation; shock transmission
This item with handle RePEc:fip:fedbwp:18-11
is also listed on EconPapers
For corrections, contact Catherine Spozio ()