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Crisis, contagion and international policy spillovers under foreign ownership of banks

Michal Brzoza-Brzezina, Marcin Kolasa () and Krzysztof Makarski ()

No 231, NBP Working Papers from Narodowy Bank Polski, Economic Research Department

Abstract: This paper checks how international spillovers of shocks and policies are modified when banks are foreign owned. To this end we build a twocountry macroeconomic model with banking sectors that are owned by residents of one (big and foreign) country. Consistently with empirical findings, we find that foreign ownership of banks amplifies spillovers from foreign shocks. It also strenghtens the international transmission of monetary and macroprudential policies. We next replicate the financial crisis in the euro area and show how, by preventing bank capital outflow in 2009, the Polish regulatory authorities managed to reduce its contagion to Poland. We also show that under foreign bank ownership such policy is strongly prefered to a recapitalization of domestic banks.

Keywords: foreign-owned banks; monetary and macroprudential policy; international spillovers; DSGE models with banking (search for similar items in EconPapers)
JEL-codes: E32 E44 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-mac, nep-mon, nep-net and nep-tra
Date: 2016
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Related works:
Journal Article: Crisis, contagion and international policy spillovers under foreign ownership of banks (2018) Downloads
Working Paper: Crisis, contagion and international policy spillovers under foreign ownership of banks (2017) Downloads
Working Paper: Crisis, contagion and international policy spillovers under foreign ownership of banks (2016) Downloads
Working Paper: Crisis, contagion and international policy spillovers under foreign ownership of banks (2015) Downloads
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