Haouat, Meriem and Moccero, Diego Nicolas and Sosa Navarro, Ramiro (2010): Foreign Banks and Credit Volatility: The Case of Latin American Countries.
Download (181Kb) | Preview
Foreign bank presence has substantially increased in Latin America during the second half of the 1990s, which has prompted an intense debate on its banking and macroeconomic consequences. In this paper, we apply ARCH techniques to jointly estimate the impact of foreign bank presence on the level and volatility of real credit in a panel of eight Latin American countries, using quarterly data over the period 1995:1-2001:4. Results show that, together with financial development, foreign bank presence has contributed to reduce real credit volatility, improving the buffer shock function of the banking sector. This finding is consistent with the fact that foreign banks are typically well diversified institutions holding higher quality assets and having access to a broad set of liquidity sources. Keywords: foreign banks; credit volatility; Latin America; panel data; ARCH techniques
|Item Type:||MPRA Paper|
|Original Title:||Foreign Banks and Credit Volatility: The Case of Latin American Countries|
|Keywords:||Foreign Banks; Credit Volatility; Latin America; Panel Data; ARCH techniques|
|Subjects:||E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply; Credit; Money Multipliers
C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C33 - Models with Panel Data; Longitudinal Data; Spatial Time Series
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages
|Depositing User:||Ramiro Sosa Navarro|
|Date Deposited:||31. May 2010 22:42|
|Last Modified:||12. Feb 2013 11:50|
Aghion, P., A. Banerjee and T. Piketty (1999), “Dualism and macroeconomic volatiLity”, Journal of Economics, 114: 1359.1397.
Allen, F. and D. Gale, (2004) “Competition and financial stability”, Journal of Money,Credit and Banking 36 (3), 453.480.
Arena, M., C. Reinhart, and F. Vázquez (2007). ‘The Lending Channel in Emerging Economies: Are Foreign Banks Different?’. Working Paper 48, International Monetary Fund, Washington DC.
Barajas, A., and R. Steiner (2002). ‘Credit Stagnation in Latin America’. Working Paper 53, International Monetary Fund, Washington, DC.
Barajas, A., R. Steiner, and N. Salazar (2000). ‘Foreign Investment in Colombia’s Financial Sector’. In S. Claessens and M. Jansen (eds), The Internationalization of Financial Services: Issues and Lessons for Developing Countries. Boston, MA.
Beck, Thorsten, Aslı Demirgüç-Kunt, and Maria Soledad Martinez Peria (2005) “Reaching Out: Access to and Use of Banking Services Across Countries,” (unpublished manuscript; Washington: World Bank).
Benston, G. J.; Hunter, W. C. y Wall, L. D. (1995): «Motivations for Bank Mergers and Acquisitions: Enhancing the Deposit Insurance Put Option Versus Earnings Diversification». Journal of Money, Credit, and Banking, volumen 27, iss. 3, páginas 777-788, Columbus.
Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
Bernanke, Ben & Gertler, Mark, 1990. "Financial Fragility and Economic Performance," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 87-114, February.
Berger, A., and T. Hannan (1989). ‘The Price-Concentration Relationship in Banking’. Review of Economics and Statistics, 71: 291–99.
Berger, A., L. Klapper, and G. Undell (2001). ‘The Ability of Banks to Lend to Informationally Opaque Small Businesses’. Journal of Banking and Finance, 25: 2127–67.
Bergstresser, D. (2001). ‘Market Concentration and Loan Portfolios in Commercial Banking’. Unpublished manuscript, MIT Department of Economics, Cambridge, MA.
Boot, A. and S. Greenbaum (1993) “Bank regulation, reputation and rents : Theoryand policy implications”, In Mayar and Vives (eds), Capital Markets and Financial Intermediation, Cambridge University Press pp. 262.285.
Boyd, J. H., and G. De Nicoló (2005). ‘The Theory of Bank Risk-Taking and Competition Revisited’. Journal of Finance, 60 (3): 1329–43.
Boyd, J. H., and S. L. Graham (1991). ‘Investigating the Banking Consolidation Trend’. Federal Reserve Bank of Minneapolis Quarterly Review, Spring Issue, 1–15.
Boyd, J. H., and S. L. Graham (1996). ‘Consolidation in U.S. Banking: Implications for Efficiency and Risk’. Working Paper 572, Federal Reserve Bank of Minneapolis, Minneapolis, MN.
Breitung, J., and M. H. Pesaran (2006). ‘Unit Roots and Cointegration in Panels’. In L. Matyas and P. Sevestre (eds), The Econometrics of Panel Data: Fundamentals and Recent Developments in Theory and Practice, Kluwer Academic Publishers.
Breusch, T. S., and A. R. Pagan (1980). ‘The Lagrange Multiplier Test and Its Applications to Model Specification in Econometrics’. Review of Economic Studies, 47 (1): 239–53.
Buch, C. (2000). ‘Why Do Banks Go Abroad? Evidence from German Data’. Financial Markets, Institutions and Instruments, 9 (1): 33–67.
Caprio, G., D. Klingebiel, L. Laeven, and G. Noguera (2005). ‘Banking Crisis Database’. In P. Honohan and L. Laeven (eds), Systemic Financial Crises, Cambridge University Press, Cambridge.
Carstens, A., D. Hardy, and C. Pazarbasioglu (2004). ‘Avoiding Banking Crises in Latin America’, Finance & Development, September Issue, 30–33.
Choi, I. (2001). ‘Unit Root Tests for Panel Data’. Journal of International Money and Banking, 20: 249–72.
Claessens, S., and M. Jansen (2000). ‘The Internationalization of Financial Services: Issues and Lessons for Developing Countries’. In S. Claessens and M. Jansen (eds), The Internationalization of Financial Services: Issues and Lessons for Developing Countries, Kluwer Academic Press, Boston, MA.
Claessens, S., A. Demirgüç-Kunt, and H. Huizinga (2001). ‘How does Foreign Entry Affect the Domestic Banking Market?’. Journal of Banking and Finance, 25 (5): 891–911.
Corvoisier, S., and R. Gropp (2002). ‘Bank Concentration and Retail Interest Rates’. Journal of Banking and Finance, 26 (11): 2155–89.
Crystal, J., B. G. Dages, and L. Goldberg (2001). ‘Does Foreign Ownership Contribute to Sounder Banks? The Latin American Experience’. In R. Litan, P. Masson and M. Pomerleano (eds), Open Doors: Foreign Participation in Financial Systems in Developing Countries, Brookings Institution Press, Washington, DC.
Crystal, J., B. G. Dages, and L. Goldberg (2002). ‘Has Foreign Bank Entry Led to Sounder Banks in Latin America?’. Current Issues in Economics and Finance, 8 (1), Federal Reserve Bank of New York, NY.
Cull, R., and M. Martínez Pería (2007). ‘Foreign Bank Participation and Crises in Developing Countries’. Working Paper, No. 4128, World Bank, Washington, DC.
Dages, B. G, L. S. Goldberg, and D. Kinney (2000). ‘Foreign and Domestic Bank Participation in Emerging Markets: Lessons from Mexico and Argentina’. Economic Policy Review, September Issue, 17–36, Federal Reserve Bank of New York, NY.
Dahl, D., and R. Shrieves (1999). ‘The Extension of International Credit by U.S. Banks: A Disaggregated Analysis, 1988-1994’. Journal of International Money and Finance, 18: 153–167.
De Haas, R., and I. Van Lelyveld (2004). ‘Foreign Bank Penetration and Private Sector Credit in Central and Eastern Europe’. Journal of Emerging Market Finance, 3 (2): 125–51.
De Haas, R., and I. Van Lelyveld (2006). ‘Foreign Banks and Credit Stability in Central and Eastern Europe: A Panel Data Analysis’. Journal of Banking and Finance, 30 (7): 1927–52.
De Nicoló, G., and M. L. Kwast (2002). ‘Systemic Risk and Financial Consolidation: Are They Related?’. Journal of Banking and Finance, 26: 861–80.
De Nicoló, G., P. Bartholomew, J. Zaman, and M. Zephirin (2004). ‘Bank Consolidation, Internationalization, and Conglomeration: Trends and Implications for Financial Risk’. Financial Markets, Institutions and Instruments, 13 (4): 173–217.
Demirgüç-Kunt, A., L. Laeven, and R. Levine (2003). ‘The Impact of Bank Regulations, Concentration, and Institutions on Bank Margins’. Policy Research Working Paper, 3030, World Bank, Washington, DC.
Demirgüç-Kunt, A., R. Levine, and H. Min (1998). ‘Foreign Banks: Efficiency, Stability and Growth’. The Implications of Globalization of World Financial Markets, Bank of Korea, Seoul.
Demsetz, R., M. Saidenberg, and P. Strahan (1996). ‘Banks with Something to Lose: The Disciplinary Role of Franchise Value’. Economic Policy Review, October Issue, Federal Reserve Bank of New York, NY.
Denizer, C., M. Iyigun, and A. Owen (2002). ‘Finance and Macroeconomic Volatility’. Contributions to Macroeconomics, 2 (1), Berkeley Electronic Press, Berkeley, CA.
Detragiache, E., and P. Gupta (2006). ‘Foreign Banks in Emerging Market Crises: Evidence from Malaysia’. Journal of Financial Stability, 2 (3): 217–42.
Detragiache, E., T. Tressel, and P. Gupta (2006). ‘Foreign Banks in Poor Countries: Theory and Evidence’. Working Paper, 18, International Monetary Fund, Washington DC.
Dornbusch, R. (1983). ‘Real Interest Rates, Home Goods, and Optimal External Borrowing’. Journal of Political Economy, 91 (1): 141–53.
Evanoff, D., and E. Ors (2002). ‘Local Market Consolidation and Bank Productive Efficiency’. Working Paper, 25, Federal Reserve Bank of Chicago, Chicago, IL.
Frankel, J. A., and A. K. Rose (1996). ‘Currency Crashes in Emerging Markets: Empirical Indicators’. Discussion Paper, 1349, Centre for Economic Policy Research, London, UK.
Galindo, A., A. Micco, and A. Powell (2005). ‘Loyal Lenders or Fickle Financiers: Foreign Banks in Latin America’. Working Paper, 529, Inter-American Development Bank, Washington, DC.
Gertler, Mark and Gilchrist, S. (1994): Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms, Quarterly Journal of Economics 109, 309-340.
Goldberg, L. S. (2002). ‘When is U.S. Bank Lending to Emerging Market Volatile?’. Working Paper, 8209, National Bureau of Economic Research, Cambridge, MA.
Goldberg, L. S. (2007). ‘Financial Sector FDI and Host Countries: New and Old Lessons’. Economic Policy Review, 13 (1): 1–17.
Greenwald B. and J. Stiglitz (1993). "Monetary policy and the theory of the risk-averse bank," Working Papers in Applied Economic Theory 93-04, Federal Reserve Bank of San Francisco.
Hannan, T. (1991). ‘Bank Commercial Loan Markets and the Role of Market Structure: Evidence from Surveys of Commercial Lending’. Journal of Banking and Finance, 15: 133–49.
Hellman, T., K. Murdock, and J. Stiglitz (2000). ‘Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?’. American Economic Review, 90 (1): 147–65.
Holmström, B., and J. Tirole (1997). ‘Financial Intermediation, Loanable Funds, and the Real Sector’. Quarterly Journal of Economics, 112 (3): 663–91.
Horvath, E., K. Mérõ, and B. Zsámboki (2002). ‘Studies on the Procyclical Behaviour of Banks’. Occasional Papers, 10, National Bank of Hungary, Budapest.
Im, K., M. H. Pesaran, and Y. Shin (2003). ‘Testing for Unit Roots in Heterogeneous Panels’. Journal of Econometrics, 115: 53–74.
Jenneau, S., and M. Micu (2002). ‘Determinants of International Bank Lending to Emerging Market Countries’. Working Paper, 112, Bank of International Settlements, Basel.
Kashyap. A. K. and J.C Stein (1995). "The Impact of Monetary Policy on Bank Balance Sheets," Carnegie-Rochester Conference Series on Public Policy, 42: 151-195.
Kashyap A. K. and J. C. Stein, (2000). "What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?," American Economic Review: 90(3): 407-428
Keeley, M. (1990). ‘Deposit Insurance, Risk and Market Power in Banking’. American Economic Review, 80 (5): 1183–200.
Kiyotaki, N. and J. Moore,(1997) “Credit Cycles” Journal of Political Economy, 105(2) 211-248.
Kraft, E. (2002). ‘Characteristics and Behaviour of Foreign Banks During and After the Banking Crisis’, presented at the 5th conference on Financial Sector Reform in Central and Eastern Europe: The Impact of Foreign Bank Entry, Tallinn.
La Porta, R., F. Lopez-de-Silanes, and A. Shleifer (2000). ‘Government Ownership of Bank’. Discussion Paper, 1890, Harvard Institute of Economic Research.
Levin, A., J. C. Lin, and C.-S. Chu (2002). ‘Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties’. Journal of Econometrics, 108: 1–24.
Levine, R. (1997). ‘Financial Development and Economic Growth: Views and Agenda’. Journal of Economic Literature, 35: 688–726.
Levine, R. (1999). ‘Foreign Bank Entry and Capital Control Liberalization: Effects on Growth and Stability’. Working Paper, Carlson School of Management, University of Minnesota, Minneapolis, MN.
Martinez Peria, M. S., A. Powell, and I. Vladkova (2005). ‘Banking on Foreigners: The Behaviour of International Bank Lending to Latin America, 1985-2000’. IMF Staff Papers, 52 (3), International Monetary Fund, Washington, DC.
Micco, A., and U. Panizza (2006). ‘Bank Ownership and Lending Behaviour’. Economics Letters, 93 (2): 248–54.
Micco, A., U. Panizza, and M. Yañez (2007). ‘Bank Ownership and Performance: Does Politics Matter?’. Journal of Banking and Finance, 31 (1): 219–41.
Mishkin, F. (1999). ‘Financial Consolidation: Dangers and Opportunities’. Journal of Banking and Finance, 23: 675–91.
Morgan, D., and P. Strahan (2003). ‘Foreign Bank Entry and Business Volatility: Evidence from U.S. States and Other Countries’. Working Paper, 9710, National Bureau of Economic Research, Cambridge, MA.
Morgan, D., B. Rime, and P. Strahan (2004). ‘Bank Integration and State Business Volatility’. Quarterly Journal of Economics, 119 (4): 1555–85.
Moshiriam, F. (2001). ‘International Investment in Financial Services’. Journal of Banking and Finance, 25: 317–37.
Paroush, J. (1995), The Effect of Merger and Acquisition Activity on the Sagety and Soundness of a Banking System, Review of Industrial Organization, Vol. 10, No 1, February
Peek, J., and E. Rosengren (1997). ‘The International Transmission of Financial Shocks: The Case of Japan’. American Economic Review, 87: 495–505.
Peek, J., and E. Rosengren (2000a). ‘Implication of the Globalisation of the Banking Sector: The Latin American Experience’. New England Economic Review, September-October Issue, 45–62.
Peek, J., and E. Rosengren (2000b). ‘Collateral Damage: Effects of the Japanese Bank Crisis on the United States’. American Economic Review, 90 (1): 30–45.
Pesaran, M. H. (2004). ‘General Diagnostic Tests for Cross Section Dependence in Panels’. Working Paper, 0435, Cambridge University, Cambridge.
Pesaran, M. H. (2007). ‘A Simple Panel Unit Root Test in the Presence of Cross Section Dependence’. Journal of Applied Econometrics, 22 (2): 265–312.
Pyle, D. (1971). ‘On the Theory of Financial Intermediation’. Journal of Finance, 26 (3): 737–47.