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Monetary Policy and Cross-Border Interbank Market Fragmentation: Lessons from the Crisis

Blattner Tobias S. () and Jonathan Swarbrick ()
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Blattner Tobias S.: European Central Bank, Sonnemannstrasse 20, 60314, Frankfurt am Main, Hessen, Germany

The B.E. Journal of Macroeconomics, 2021, vol. 21, issue 1, 323-368

Abstract: We present a two-country model featuring risky lending and cross-border interbank market frictions. We find that (i) the strength of the financial accelerator, when applied to banks operating under uncertainty in an interbank market, will critically depend on the economic and financial structure of the economy; (ii) adverse shocks to the real economy can be the source of banking crisis, causing an increase in interbank funding costs, aggravating the initial shock; and (iii) asset purchases and central bank long-term refinancing operations can be effective substitutes for, or supplements to, conventional monetary policy.

Keywords: cross-border capital flows; financial frictions; interbank market; monetary union; unconventional monetary policy (search for similar items in EconPapers)
JEL-codes: E44 E52 F32 F36 (search for similar items in EconPapers)
Date: 2021
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Related works:
Working Paper: Monetary Policy and Cross-Border Interbank Market Fragmentation: Lessons from the Crisis (2020) Downloads
Working Paper: Monetary policy and cross-border interbank market fragmentation: lessons from the crisis (2018) Downloads
Working Paper: Monetary policy and cross-border interbank market fragmentation: lessons from the crisis (2017) Downloads
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DOI: 10.1515/bejm-2019-0097

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