The expansion of global banking has represented one the major development in the macro financial landscape in recent decades. The way global banks have penetrated host countries has progressively shifted from a more cross border lending model to a more direct local presence of global banks. A growing literature in macro banking has been increased exploring the macroeconomic implications of global banks. Most of this literature, however, appears to neglect the articulated decision process that characterized complex financial institutions, such as global banks. This gap in our understanding is particularly relevant if we consider the increased local presence of multinational banks branches and subsidiaries in host countries. Global banks routinely make complex decision regarding the allocation of monitoring resources and liquidity funds across their global conglomerate. These decisions also have implications for the allocation and control between global banks headquarters and local affiliates. Studying the allocation of monitoring liquidity and control on the one side and multinational banks lending decisions on the other side is thus critical for understanding the role of multinational banks in macroeconomic stability.
This research project aims to understand how multinational banks can affect the transmission of domestic and international shocks, with a special focus on how the organization structure and business models of multinational banks can shape this influence. To this end, the project conducts both an empirical and a theoretical analysis. We first investigate how the organizational structure of global banks affect the response of their lending, deposit taking and liquidity allocation to aggregate shocks and draw inferences on the patterns of the response of global banks. We next develop a dynamic business cycle model where multinational banks coexist with local banks in the credit market.
