Shock Transmission Through International Banks: The Italian Case

22 Pages Posted: 7 Mar 2015

Date Written: September 26, 2014

Abstract

This paper studies what impact liquidity shocks have on liquid assets and domestic and cross-border lending. In particular, we look for differences across banks depending on their international exposure and we account for the effects of the sovereign debt crisis and the ECB’s non-conventional monetary policy measures. Our main findings are that liquid assets are important drivers of lending adjustment to liquidity risk and that this effect is significant for domestic lending but not for foreign lending even considering the characteristics of the destination market. Differences in banks’ international exposure play a limited role in the way liquidity shocks are transmitted.

Keywords: liquidity shock, cross-border lending, international banks

JEL Classification: G20, G21

Suggested Citation

Caccavaio, Marianna and Carpinelli, Luisa and Marinelli, Giuseppe and Sette, Enrico, Shock Transmission Through International Banks: The Italian Case (September 26, 2014). Bank of Italy Occasional Paper No. 232. Available at SSRN: https://ssrn.com/abstract=2574650 or http://dx.doi.org/10.2139/ssrn.2574650

Marianna Caccavaio

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Luisa Carpinelli

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Giuseppe Marinelli

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Enrico Sette (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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