International Shock Transmission: Does Bank Organizational Structure Matter?

60 Pages Posted: 5 Dec 2019

See all articles by Priyank Gandhi

Priyank Gandhi

Rutgers Business School, Newark and New Brunswick

George Issa

The University of Sydney

Elvis Jarnecic

The University of Sydney; Financial Research Network (FIRN)

Date Written: November 5, 2019

Abstract

The organization structure of global banks affects how they respond to liquidity shocks and matters for international shock transmission. Liquidity shocks to global banks induces a fire sales of securities by their international branches that rely on parent banks for funding, but not by their international subsidiaries that are independently capitalized and domestically funded. Domestic banks allocate funds to purchase securities sold in such fire sales, but in turn reduce credit supply, causing liquidity shocks to spill-over. Our study contributes to the debate regarding optimal regulation of global banks and externalities arising from securities trading by such banks.

Keywords: Banking crisis, Bank regulation, Contagion, Financial crisis, Fixed income markets, Liquidity shocks

JEL Classification: G010, G210, G280

Suggested Citation

Gandhi, Priyank and Issa, George and Jarnecic, Elvis, International Shock Transmission: Does Bank Organizational Structure Matter? (November 5, 2019). Available at SSRN: https://ssrn.com/abstract=3489805 or http://dx.doi.org/10.2139/ssrn.3489805

Priyank Gandhi (Contact Author)

Rutgers Business School, Newark and New Brunswick ( email )

111 Washington Avenue
Newark, NJ 07102
United States

George Issa

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

Elvis Jarnecic

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
23
Abstract Views
279
PlumX Metrics