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The international transmission of shocks through the lens of foreign banks in Hong Kong

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  • Kwan, Simon H.
  • Ho, Kelvin
  • Hui, Cho-hoi
  • Wong, Eric T.C.

Abstract

This paper studies the international transmission of shocks through the foreign bank lending channel. We find evidence that foreign banks whose parent is headquartered in a country experiencing a financial crisis significantly reduce their lending in the host country. Our results are based on studying foreign banks in Hong Kong during the 2008 US financial crisis and the 2010 European sovereign debt crisis. However, we do not find an overall decline in bank lending during the foreign crisis. Banks from crisis country with a higher deposit ratio reduced lending less. Banks from crisis country with preference for liquidity reduced lending more, consistent with liquidity hoarding during crisis.

Suggested Citation

  • Kwan, Simon H. & Ho, Kelvin & Hui, Cho-hoi & Wong, Eric T.C., 2024. "The international transmission of shocks through the lens of foreign banks in Hong Kong," Journal of International Money and Finance, Elsevier, vol. 142(C).
    • Handle: RePEc:eee:jimfin:v:142:y:2024:i:c:s0261560624000147
    DOI: 10.1016/j.jimonfin.2024.103027
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    References listed on IDEAS

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    More about this item

    Keywords

    Financial crisis; Foreign banks; Liquidity shock;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance

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