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International financial integration, crises and monetary policy: evidence from the Euro area interbank crises

Puriya Abbassi, Falk Bräuning, Falko Fecht () and Jose-Luis Peydro ()

No 965, Working Papers from Barcelona Graduate School of Economics

Abstract: We analyze how international financial integration is affected by the recent financial and sovereign crises, exploiting euro-area proprietary interbank data, crisis and monetary shocks, and loan terms to the same borrower during the same day by domestic versus foreign lenders. Crisis shocks reduce the supply of cross-border liquidity, with stronger volume than pricing effects, thereby impairing international financial integration. On the extensive margin, the cross-border credit crunch is independently of quality. On the intensive margin, however, GIPSheadquartered debtor banks suffer in the Lehman crisis, but effects are stronger in the sovereign-debt crisis, especially for riskier banks. Consistent with asymmetric information being the key driver, the cross-border liquidity crunch is stronger for longer-term loans, and weaker for foreign lender banks that are located in the same country than the borrower. Nonstandard monetary policy improves interbank liquidity, but without fostering strong cross-border financial reintegration.

Keywords: financial integration; financial crises; cross-border lending; monetary policy; euro area sovereign crisis; liquidity (search for similar items in EconPapers)
JEL-codes: E58 F30 G01 G21 G28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac, nep-mon and nep-opm
Date: 2017-05
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Working Paper: International financial integration, crises and monetary policy: evidence from the Euro area interbank crises (2018) Downloads
Working Paper: International financial integration, crises, and monetary policy: evidence from the euro area interbank crises (2017) Downloads
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