Foreign Currency Bank Funding and Global Factors

Signe Krogstrup and Cédric Tille

No 2018/097, IMF Working Papers from International Monetary Fund

Abstract: The literature on the 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 concise 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. An analysis of a rich dataset of European banks’ aggregate balance sheets lends support to the model predictions, especially in countries outside the euro area.

Keywords: WP; exchange rate; financial institution; forward market; Currency mismatch; capital flows; push factors; spillovers; cross-border transmission of shocks; European bank balance sheets; risk aversion; bank flow; wholesale funding; Cross border; exposure measure; bank funding; foreign currency borrowing; balance sheet exposure; bank foreign currency; forward contract; swap market; Currencies; Foreign currency exposure; Financial statements; Exchange rate risk; Global (search for similar items in EconPapers)
Pages: 64
Date: 2018-05-09
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Citations: View citations in EconPapers (12)

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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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