ISBN:
9781839820588
Content:
This chapter investigates a shock transmission path between a home country (a country where globalized banks’ headquarters are located) and a host country (Indonesia as the emerging market) through the lending channel of global banks’ local branches (i.e., the internal transfer channel). Using novel data of monthly individual foreign bank’s balance sheet in Indonesia, the author finds the evidence that shocks to a parent bank and a home economy are transmitted to a host economy through the foreign banks’ internal capital market. With the Indonesia banks’ capital injections and their difficulty in financing dollar funds without risk premiums since the 1998s crisis, the foreign banks’ dollar lending in Indonesia is a good showcase of internal capital markets. A change in a home stock market index and industrial production appears to have a negative effect on growth rates in foreign currency loans of foreign banks in the host market. On the other hand, high growth rates in the parent bank’s stock price in the home market lead to an increase in foreign banks’ US dollar lending in the host country. This effect does not appear in local currency lending because limited hedging instruments against foreign exchange risk results in immobility of bank capital in the local currency.
In:
Emerging market finance, Bingley, U.K. : Emerald Publishing Limited, 2020, (2020), Seite 89-112, 9781839820588
In:
Emerald Publishing Limited, 9781839820601
In:
year:2020
In:
pages:89-112
Language:
English
DOI:
10.1108/S1569-376720200000021006
URL:
Volltext
(Deutschlandweit zugänglich)
