The Role of US Monetary Policy in Banking Crises Across the World
Author(s)Durdu, C. B; Martin, Alex; Martin, Alex; Zer, Ilknur
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We examine the role of US monetary policy in banking crises across the world by using a cross-country database spanning 69 countries over the 1870–2010 period. US monetary policy tightening increases the probability of a banking crisis for those countries with direct linkages to the USA, either in the form of trade links or significant share of USD-denominated liabilities. Conversely, if a country is integrated globally, rather than having a direct exposure, the effect is ambiguous. These findings suggest that the effect of US monetary policy in global banking crises is not uniform and is largely dependent on the nature of linkages with the USA.
DepartmentMassachusetts Institute of Technology. Department of Economics
IMF Economic Review
Palgrave Macmillan UK
Durdu, C.B. et al. "The Role of US Monetary Policy in Banking Crises Across the World." IMF Economic Review 68 (March 2020): 66–107 © 2020 International Monetary Fund