Does Government Intervention Affect Banking Globalization?

Anya Kleymenova, Andrew Rose and Tomasz Wieladek

No 21981, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using data from British and American banks, we provide empirical evidence that government intervention affects banking globalization along three dimensions: depth, breadth and persistence. We examine depth by studying whether a bank’s preference for domestic, as opposed to external, lending (funding) changes when it is subjected to a large public intervention, such as bank nationalization. Our results suggest that, following nationalization, non-British banks allocate their lending away from the UK and increase their external funding. Second, we find that nationalized banks from the same country tend to have portfolios of foreign assets that are spread across countries in a way that is far more similar than either private banks from the same country or nationalized banks from different countries, consistent with an impact on the breadth of globalization. Third, we study the Troubled Asset Relief Program (TARP) to examine the persistence of the effect of large government interventions. We find weak evidence that upon entry into the TARP, foreign lending declines but domestic does not. This effect is observable at the aggregate level, and seems to disappear upon TARP exit. Collectively, this evidence suggests that large government interventions affect the depth and breadth of banking globalization, but may not persist after public interventions are unwound.

JEL-codes: F36 G28 (search for similar items in EconPapers)
Date: 2016-02
New Economics Papers: this item is included in nep-ban
Note: IFM
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Citations: View citations in EconPapers (9)

Published as Does Government Intervention Affect Banking Globalization? , Anya Kleymenova, Andrew Rose, Tomasz Wieladek. in International Finance in the Global Markets , Aoki, Fukuda, Hoshi, and Kano. 2016
Published as Kleymenova, Anya & Rose, Andrew K. & Wieladek, Tomasz, 2016. "Does Government Intervention Affect Banking Globalization?," Journal of the Japanese and International Economies, Elsevier, vol. 40(C), pages 43-58.

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Journal Article: Does Government Intervention Affect Banking Globalization? (2016)
Journal Article: Does government intervention affect banking globalization? (2016)
Working Paper: Does government intervention affect banking globalisation? (2016)
Chapter: Does Government Intervention Affect Banking Globalization? (2015)
Working Paper: Does Government Intervention Affect Banking Globalization?
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