Rising internatio)nal bank finanicinig to developing lending has become less "indiscriminate" and more coulitries hIas fLueled a debate on the behavior of these responsive to host conditionis over time. Responsiveness claimils. The auithors analyze claimlls from seven homiie to the latter becomlies less "pro-cyclical" as expOSure (lender) couintries on ten host (borrower) countries in increases. Finallv, foreign bank lending reacts more to Latin America. Thev' find that banks transimiit shocks positive thani to negative host shocks and is not from their homIIe cotlitries and chaniges in their claims oil significanltly curtailed during crises.other coulitries spill over to individuial hosts. However, Thlis paper-a prodtict of Finance, Developmnent Researchi Group-is part of a larger effort in the grouip to stidy foreign banik lendiig.
Martinez Peria empirically investigates the monetary Overall, she finds no systematic evidence that ba.kieg impact of banking crises in Chile, Colombia, Denmark, crises cause money demand instability. Nor do trie resulLs Japan, Kenya, Malaysia, and Uruguay. She uses consistently support the notion that the relationship cointegration analysis and error correction modeling to between monetary indicators aind prices undcr,oes research: structural breaks during crises. Howevert altheolugi * Whether money demand stability is threatened by individual coefficients in price equations do nct seem,-o banking crises. be severely affected by crises, crises can soeneti ines gim t * Whether crises bring about structural breaks in the rise to variance instability in price or inflation ;-qations. relationship between monetary indicators and prices. This paper-a product of Finance, Development Research Group-is part of a larger effort in the group to study bankmng crises. The study was funded by the Bank's Research Support Budget under the research project "Monetary Policy aind Monetary Indicators during Banking Crises" (RPO 683-24). Copies of this paper are available free from the World Bank,
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