Cross-border banking and global liquidity

Valentina Bruno and Hyun Song Shin

No 458, BIS Working Papers from Bank for International Settlements

Abstract: We investigate global factors associated with bank capital flows. We formulate a model of the international banking system where global banks interact with local banks. The solution highlights the bank leverage cycle as the determinant of the transmission of financial conditions across borders through banking sector capital flows. A distinctive prediction of the model is that local currency appreciation is associated with higher leverage of the banking sector, thereby providing a conceptual bridge between exchange rates and financial stability. In a panel study of 46 countries, we find support for the key predictions of our model.

Keywords: Cross-border banking flows; bank leverage; global banks (search for similar items in EconPapers)
Pages: 47 pages
Date: 2014-08
New Economics Papers: this item is included in nep-ban, nep-ger, nep-ifn, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (181)

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Related works:
Journal Article: Cross-Border Banking and Global Liquidity (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:458

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