Monetary policy and cross-border interbank market fragmentation : lessons from the crisis
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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.
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
The B.E. Journal of Macroeconomics
Copyright © 2020 Tobias S. Blattner and Jonathan M. Swarbrick, published by De Gruyter. Open Access. This work is licensed under the Creative Commons Attribution 4.0 International License.
DescriptionThe 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.
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