Crisis, contagion and international policy spillovers under foreign ownership of banks

Michal Brzoza-Brzezina, Marcin Kolasa and Krzysztof Makarski

No 2016-003, KAE Working Papers from Warsaw School of Economics, Collegium of Economic Analysis

Abstract: This paper checks how international spillovers of shocks and policies are modified whenbanks are foreign owned. To this end we build a two-country macroeconomic modelwith banking sectors that are owned by residents of one (big and foreign) country.Consistently with empirical findings, in our model foreign ownership of banks amplifies spillovers from foreign shocks. It also strenghtens the international transmissionof monetary and macroprudential policies. We next use the model to replicate thefinancial crisis in the euro area and show how, by preventing bank capital outow in2009, the Polish regulatory authorities managed to reduce its contagion to Poland.We also find that under foreign bank ownership such policy is strongly prefered to arecapitalization of domestic banks.

Keywords: foreign-owned banks; monetary and macroprudential policy; international spillovers; DSGE models with banking (search for similar items in EconPapers)
JEL-codes: E32 E44 E58 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2016-03
New Economics Papers: this item is included in nep-ban, nep-dge, nep-mac, nep-mon, nep-pke and nep-tra
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Related works:
Journal Article: Crisis, contagion and international policy spillovers under foreign ownership of banks (2018)
Working Paper: Crisis, contagion and international policy spillovers under foreign ownership of banks (2017)
Working Paper: Crisis, contagion and international policy spillovers under foreign ownership of banks (2016)
Working Paper: Crisis, contagion and international policy spillovers under foreign ownership of banks (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:sgh:kaewps:2016003

DOI: 10.33119/kaewps2016003

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