Essays on the impact of government policy, internationalization and financial innovation on financial stability

For better or worse, the global financial system went through remarkable change over the last decades. Cross-border banking giants emerged; many countries opened up their banking systems welcoming foreign ownership; government ownership in banking, which is deemed to be vicious, declined globally. The financial crisis of 2007-2009, however, changed our understanding of the global financial system and provided renewed impetus to some crucial debates, which may inform the policy-makers to avoid future crises. The chapters of this thesis contribute the ongoing discussions by providing empirical evidence on some crucial aspects. Chapter 2 analyzes the transmission of real estate price changes through multinational banks by investigating the credit supply of banks in response to national and foreign real estate price changes. In Chapter 3, we focus on the internationalization of banks and possible roles of financial safety nets and market discipline related to internationalization. Chapter 4 provides empirical evidence regarding countercyclical behavior of government owned banks, which may be useful during bad times. Finally, in Chapter 5 we focus on the macroeconomic effects of securitization at the aggregate level and show that securitization may have a negative impact on real economic outcomes by changing the credit composition towards consumption.