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International Banking and Liquidity Risk Transmission: Evidence from Ireland

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  • Mary Everett
  • Jane Kelly
  • Fergal Mccann

Abstract

The increased international expansion of Irish banks, combined with entry into the domestic market by a number of foreign competitors makes Ireland a pertinent country for studying the international transmission of liquidity risk. Using bank-level panel data and novel data on access to central bank liquidity and Exceptional Liquidity Assistance, regression analysis confirms a risk-absorbing effect, whereby official liquidity helped mitigate the effect of liquidity risk on domestic lending by larger Irish banks. Regression analysis also confirms that a larger net borrowing position vis-à-vis foreign affiliates insulates the effect of liquidity risk on domestic lending, suggesting that banks’ internal capital markets can provide a counterweight to systemic risks.

Suggested Citation

  • Mary Everett & Jane Kelly & Fergal Mccann, 2015. "International Banking and Liquidity Risk Transmission: Evidence from Ireland," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(3), pages 542-567, November.
    • Handle: RePEc:pal:imfecr:v:63:y:2015:i:3:p:542-567
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    Cited by:

    1. International Monetary Fund, 2016. "Ireland: Financial Sector Assessment Program: Technical Note-Stress Testing the Banking System," IMF Staff Country Reports 2016/315, International Monetary Fund.
    2. Barbosa, Luciana & Bonfim, Diana & Costa, Sónia & Everett, Mary, 2018. "Cross-border spillovers of monetary policy: What changes during a financial crisis?," Journal of International Money and Finance, Elsevier, vol. 89(C), pages 154-174.
    3. Yu Hsing, 2016. "Is Real Depreciation Expansionary? The Case of Ireland," Bulletin of Applied Economics, Risk Market Journals, vol. 3(1), pages 1-9.

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