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Buch, Claudia M.; Carstensen, Kai; Schertler, Andrea (2010): Macroeconomic shocks and banks’ foreign assets. In: Journal of Money, Credit and Banking, Vol. 42, No. 1: pp. 171-188
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Recent developments in international financial markets have highlighted the role of banks in the transmission of shocks across borders. We employ dynamic panel methods for a sample of OECD countries to analyze whether banks’ foreign assets react to macroeconomic shocks at home and abroad. We find that banks reduce their foreign assets in response to a relative increase in domestic interest rates, and they increase their foreign assets when the growth rate of world energy prices rises. The responses are characterized by a temporal overshooting and a dynamic adjustment process that extends over several quarters.