Financial Integration and Foreign Banks in Latin America: How Do They Impact the Transmission of External Financial Shocks?

Arturo Galindo, Alejandro Izquierdo and Liliana Rojas-Suarez

No 4651, Research Department Publications from Inter-American Development Bank, Research Department

Abstract: This paper explores the impact of international financial integration on credit markets in Latin America, using a cross-country dataset covering 17 countries between 1996 and 2008. It is found that financial integration amplifies the impact of international financial shocks on aggregate credit and interest rate fluctuations. Nonetheless, the net impact of integration on deepening credit markets dominates for the large majority of states of nature. The paper also uses a detailed bank-level dataset that covers more than 500 banks for a similar time period to explore the role of financial integration—captured through the participation of foreign banks—in propagating external shocks. It is found that interest rates charged and loans supplied by foreign-owned banks respond more to external financial shocks than those supplied by domestically owned banks. This does not hold for all foreign banks. Spanish banks in the sample behave more like domestic banks and do not amplify the impact of foreign shocks on credit and interest rates.

Keywords: Foreign Banks; Credit; Interest Rates; Financial Shocks (search for similar items in EconPapers)
JEL-codes: F36 G0 G21 (search for similar items in EconPapers)
Date: 2010-02
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cwa, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Downloads: (external link)
http://www.iadb.org/research/pub_hits.cfm?pub_id=I ... me=pubIDB-WP-116.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.iadb.org/research/pub_hits.cfm?pub_id=IDB-WP-116&pub_file_name=pubIDB-WP-116.pdf [301 Moved Permanently]--> https://www.iadb.org/research/pub_hits.cfm?pub_id=IDB-WP-116&pub_file_name=pubIDB-WP-116.pdf)

Related works:
Working Paper: Financial Integration and Foreign Banks in Latin America: How Do They Impact the Transmission of External Financial Shocks? (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:idb:wpaper:4651

Access Statistics for this paper

More papers in Research Department Publications from Inter-American Development Bank, Research Department Contact information at EDIRC.
Bibliographic data for series maintained by Felipe Herrera Library ().