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The Role of US Monetary Policy in Banking Crises Across the World

C. Bora Durdu, Alex Martin () and Ilknur Zer ()
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Alex Martin: MIT
Ilknur Zer: Federal Reserve Board

IMF Economic Review, 2020, vol. 68, issue 1, No 4, 66-107

Abstract: Abstract We examine the role of US monetary policy in banking crises across the world by using a cross-country database spanning 69 countries over the 1870–2010 period. US monetary policy tightening increases the probability of a banking crisis for those countries with direct linkages to the USA, either in the form of trade links or significant share of USD-denominated liabilities. Conversely, if a country is integrated globally, rather than having a direct exposure, the effect is ambiguous. These findings suggest that the effect of US monetary policy in global banking crises is not uniform and is largely dependent on the nature of linkages with the USA.

Keywords: Banking crises; Financial stability; Monetary policy shocks; Sudden stops; Global financial cycles (search for similar items in EconPapers)
JEL-codes: E44 E52 F42 G15 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1057/s41308-020-00109-1

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