Cross-border effects of regulatory spillovers: Evidence from Mexico

Jagdish Tripathy

Journal of International Economics, 2020, vol. 126, issue C

Abstract: This paper studies the spillover of a macroprudential regulation in Spain to the Mexican financial system via Mexican subsidiaries of Spanish banks. The spillover caused a drop in the supply of household credit in Mexico. Municipalities with a higher exposure to Spanish subsidiaries experienced a larger contraction in household credit. These localized contractions caused a drop in macroeconomic activity in the local non-tradable sector. Estimates of the elasticity of loan demand by the non-tradable sector to changes in household credit supply range from 1.2–1.8. These results emphasize cross-border effects of regulations in the presence of global banks.

Keywords: Regulatory spillovers; Capital shock; Household credit; Non-tradable sector (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:126:y:2020:i:c:s0022199620300660

DOI: 10.1016/j.jinteco.2020.103350

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