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The global financial crisis shook the foundations of international banking and finance and put the international banking system under intense stress. Many financial markets became dysfunctional, and many international banks went bankrupt. Although the crisis originated in advanced economies, it quickly moved to emerging market economies (EMEs), particularly in the aftermath of the collapse of Lehman Brothers. Cross-border bank lending proved to be one of the major financial channels through which stresses in the international financial system were transmitted to individual EMEs. This paper examines cross-border bank lending during the crisis. It also aims to understand the role played by international banks and hopes to provide lessons for thinking about economic policy.
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