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      Foreign banks, financial crises and macroeconomic fluctuations

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      Author
      Önder, Z.
      Özyıldırım, S.
      Date
      2016
      Source Title
      Economics of Transition
      Print ISSN
      0967-0750
      Publisher
      Blackwell Publishing Ltd
      Volume
      24
      Issue
      3
      Pages
      447 - 479
      Language
      English
      Type
      Article
      Item Usage Stats
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      Abstract
      Understanding the implications of increased foreign bank presence is especially compelling in periods of financial crisis. In this paper, we explore this issue by examining the relationship between the involvement of foreign banks in the banking systems and the volatility of key macroeconomic variables in normal and crisis periods. Using a sample of 20 Emerging European countries from 1998 to 2013, we find that an increase in the assets of foreign banks in the banking system reduces output and consumption growth volatility in general but does not significantly affect the volatility of investments. However, these banks were found to play a significant role in increasing output, consumption and investment volatility in 2009. Our findings suggest that foreign banks’ harmful impact during the global crisis was only temporary and that they seem to help Emerging European countries stabilize macroeconomic volatility in normal times and after the global crisis.
      Keywords
      Crisis
      Emerging europe
      Foreign banks
      Macroeconomic volatility
      Banking
      Consumption behavior
      Economic growth
      Financial crisis
      Investment
      Macroeconomics
      Europe
      Permalink
      http://hdl.handle.net/11693/36400
      Published Version (Please cite this version)
      http://dx.doi.org/10.1111/ecot.12096
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      • Department of Management 551
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