This chapter reviews the changing international exposures of U.S. bank balance sheets since the mid-1980s. The data indicate that U.S. banks may even play a positive role in helping reduce the amplitude of business cycles in smaller nations. The relationships between business cycle variables and U.S. bank foreign exposures appear unstable over time and differentiated by region. U.S. bank claims on Europe exhibit positive growth in the cross-border and local claim components, with this growth alternatively attributable to trend or to U.S. gross domestic product (GDP) cyclical transmission. It is shown that cyclical variables explain very little of the movements observed in cross-border claims or the growth in local claims. The evidence certainly does not support strong U.S. business-cycle transmission. Indeed, the lack of importance of local business-cycle variables as determinants of U.S. bank foreign exposures may have direct policy relevance.
Keywords: balance sheets; U.S. banks; business cycles; foreign exposures; Europe; gross domestic product
Chapter. 11602 words. Illustrated.
Subjects: Macroeconomics and Monetary Economics
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