The International Transmission of Bank Liquidity Shocks

Download or read book The International Transmission of Bank Liquidity Shocks written by Philipp Schnabl and published by . This book was released on 2011 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: I exploit the 1998 Russian default as a negative liquidity shock to international banks and analyze its transmission to Peru. I find that after the shock international banks reduce bank-to-bank lending to Peruvian banks and Peruvian banks reduce lending to Peruvian firms. The effect is strongest for domestically owned banks that borrow internationally, intermediate for foreign-owned banks, and weakest for locally funded banks. I control for credit demand by examining firms that borrow from several banks. These results suggest that international banks transmit liquidity shocks across countries and that negative liquidity shocks reduce bank lending in affected countries.