International Evidence on the Interaction between Cross-Border Capital Flows and Domestic Credit Growth

Yavuz Arslan and Temel Taskin

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: The extent of interaction between international capital flows and macro-financial stability is an important and unsettled topic of debate. We contribute to this discussion by providing empirical evidence on the relationship between capital flows and domestic credit growth using a large cross-country panel dataset which includes both developed and developing economies. In the benchmark regression, we use a fixed effect model, and find a statistically significant and positive co-movement between the two variables, which is consistent with common wisdom and recent theory a la Bruno and Shin (2014). This empirical regularity is more pronounced in upper-middle income countries in comparison with the lower-middle and high income countries. The main results are robust to other econometric specifications and a variety of alternative measures for credit growth and capital flows.

Keywords: Cross-border capital flows; Domestic credit growth; Macro-financial stability; Cross-country evidence (search for similar items in EconPapers)
JEL-codes: E51 F32 G15 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-ifn, nep-mac and nep-opm
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN ... g+Paperss/2014/14-18 (application/pdf)

Related works:
Journal Article: International Evidence on the Interaction between Cross-Border Capital Flows and Domestic Credit Growth (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:1418

Access Statistics for this paper

More papers in Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey Contact information at EDIRC.
Bibliographic data for series maintained by Sermet Pekin () and Ilker Cakar () and ().