Monetary policy and cross-border interbank market fragmentation : lessons from the crisis
Abstract
We present a two-country model featuring risky lending and cross-border interbank market frictions. We find that (i) the strength of the financial accelerator, when applied to banks operating under uncertainty in an interbank market, will critically depend on the economic and financial structure of the economy; (ii) adverse shocks to the real economy can be the source of banking crisis, causing an increase in interbank funding costs, aggravating the initial shock; and (iii) asset purchases and central bank long-term refinancing operations can be effective substitutes for, or supplements to, conventional monetary policy.
Citation
Swarbrick , J & Blattner , T 2020 , ' Monetary policy and cross-border interbank market fragmentation : lessons from the crisis ' , The B.E. Journal of Macroeconomics , vol. 21 , no. 1 , pp. 323-368 . https://doi.org/10.1515/bejm-2019-0097
Publication
The B.E. Journal of Macroeconomics
Status
Peer reviewed
ISSN
1935-1690Type
Journal article
Description
The paper was based on work written while Jonathan was a doctoral candidate; he gratefully acknowledges the financial support from the Economic and Social Research Council [grant number ES/J500148/1] received during this period.Collections
Items in the St Andrews Research Repository are protected by copyright, with all rights reserved, unless otherwise indicated.