Recessions and recoveries: Multinational banks in the business cycle

Qingqing Cao, Raoul Minetti, María Pía Olivero and Giacomo Romanini

Journal of Monetary Economics, 2021, vol. 117, issue C, 203-219

Abstract: How does the expansion of multinational banks influence the business cycle of host countries? We study an economy where multinational banks can transfer liquidity across borders through internal capital markets but are hindered in their allocation of liquidity by limited knowledge of local firms’ assets. We find that, following domestic banking shocks, multinational banks moderate the depth of the contraction but slow down the recovery. A calibration to Polish data suggests that multinational banks reduce the average depth of recessions by about 5% but increase their duration by 10%. The predictions are broadly consistent with evidence from a large panel of countries.

Keywords: Multinational banks; Business cycle dynamics; Recoveries (search for similar items in EconPapers)
JEL-codes: E44 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:117:y:2021:i:c:p:203-219

DOI: 10.1016/j.jmoneco.2020.01.002

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