The Effects of COVID-19 Pandemic on Cross-Border Banking Flows: comparative analysis between advanced and emerging market economies

Bruno Tiberto and Francisco Ferreira

No 598, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: The COVID-19 pandemic had a strong impact on the global economy, causing turmoil in financial markets and instability in the dynamics of capital flows. Using quarterly data extracted from Local Banking Statistics, published by the Bank for International Settlements, this study examines the effects of the COVID-19 pandemic on cross-border banking flows in recipient countries. Using an unbalanced panel of 20 advanced economies and 34 emerging market economies, we investigate the effects of COVID-19 pandemic on cross-border banking total flows. In addition, we also assess the effects of COVID-19 pandemic on the distribution of cross-border banking flows to the bank and non-bank sectors as well as to the instruments: loans and debt securities. Our results suggest the COVID-19 pandemic changed the destination of cross-border banking flows, deepening the concentration of capital flows to advanced economies. We also found evidence that the COVID-19 pandemic led to a reallocation of cross-border banking flows across economic sector, from the bank to the non-bank sector, as well as by type of financial instrument, from loans to debt securities.

Date: 2024-08
New Economics Papers: this item is included in nep-inv and nep-mon
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