Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/89137
Authors: 
Galindo, Arturo
Izquierdo, Alejandro
Rojas-Suarez, Liliana
Year of Publication: 
2010
Series/Report no.: 
IDB Working Paper Series IDB-WP-116
Abstract: 
This paper explores the impact of international financial integration on credit markets in Latin America, using a cross-country dataset covering 17 countries between 1996 and 2008. It is found that financial integration amplifies the impact of international financial shocks on aggregate credit and interest rate fluctuations. Nonetheless, the net impact of integration on deepening credit markets dominates for the large majority of states of nature. The paper also uses a detailed bank-level dataset that covers more than 500 banks for a similar time period to explore the role of financial integration—captured through the participation of foreign banks—in propagating external shocks. It is found that interest rates charged and loans supplied by foreign-owned banks respond more to external financial shocks than those supplied by domestically owned banks. This does not hold for all foreign banks. Spanish banks in the sample behave more like domestic banks and do not amplify the impact of foreign shocks on credit and interest rates.
Subjects: 
Foreign Banks
Credit
Interest Rates
Financial Shocks
JEL: 
F36
G0
G21
Document Type: 
Working Paper

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