Foreign Currency Bank Funding and Global Factors

Signe Krogstrup and Cédric Tille

No 09-2018, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: The literature on drivers of capital flows stresses the prominent role of global financial factors. Recent empirical work, however, highlights how this role varies across countries and time, and this heterogeneity is not well understood. We revisit this question by focusing on financial intermediaries’ funding flows in different currencies. A portfolio model shows that the sign and magnitude of the response of foreign currency funding flows to global risk factors depend on the financial intermediary’s pre-existing currency exposure. Analysis of data on European banks’ aggregate balance sheets lends support to the model predictions, especially in countries outside the euro area.

Keywords: Currency mismatch; capital flows; push factors; spillovers; cross-border transmission of shocks; European bank balance sheets (search for similar items in EconPapers)
JEL-codes: F32 F34 F36 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2018-05-11
New Economics Papers: this item is included in nep-ban, nep-eec, nep-ifn and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Foreign Currency Bank Funding and Global Factors (2018)
Working Paper: Foreign Currency Bank Funding and Global Factors (2018)
Working Paper: Foreign currency bank funding and global factors (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:gii:giihei:heidwp09-2018

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