Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of New York
Staff Reports
Global banks and international shock transmission: evidence from the crisis
Nicola Cetorelli
Linda S. Goldberg
Abstract

Global banks played a significant role in transmitting the 2007-09 financial crisis to emerging-market economies. We examine adverse liquidity shocks on main developed-country banking systems and their relationships to emerging markets across Europe, Asia, and Latin America, isolating loan supply from loan demand effects. Loan supply in emerging markets across Europe, Asia, and Latin America was affected significantly through three separate channels: 1) a contraction in direct, cross-border lending by foreign banks; 2) a contraction in local lending by foreign banks' affiliates in emerging markets; and 3) a contraction in loan supply by domestic banks, resulting from the funding shock to their balance sheets induced by the decline in interbank, cross-border lending. Policy interventions, such as the Vienna Initiative introduced in Europe, influenced the lending-channel effects on emerging markets of shocks to head-office balance sheets.


Download Full text
Download Full text
Cite this item
Nicola Cetorelli & Linda S. Goldberg, Global banks and international shock transmission: evidence from the crisis, Federal Reserve Bank of New York, Staff Reports 446, 2010.
More from this series
JEL Classification:
Subject headings:
Keywords: Capital market ; Emerging markets ; International finance ; International liquidity ; Banks and banking; International ; Banks and banking; Foreign ; Financial crises ; Loans; Foreign
For corrections, contact Amy Farber ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal