Cross-border capital inflows and systemic financial risks

Haoran Xu, Wenlong Miao and Siyu Zhang

International Review of Economics & Finance, 2025, vol. 99, issue C

Abstract: Preventing cross-border capital flow risks and maintaining financial stability are important aspects of open economies participating in globalization. Based on cross-national sample data of more than 5000 financial institutions in 33 countries from 2005 to 2022, we evaluate the impact and mechanism of various types of cross-border capital inflows on systemic financial risks in various countries. The results reveal that capital inflows can increase the systemic financial risks of various countries and reduce financial stability. Among them, equity capital inflows and debt capital inflows are the main types of capital that increase systemic financial risks. This effect is mainly manifested in economies with low financial development levels and market-oriented financial systems. Furthermore, this study finds that the regulatory effects of domestic economic boom cycles and domestic and foreign asset price spreads serve to amplify the impact of debt capital inflows on systemic financial risks. Domestic credit expansion increases the aggravating effect of equity capital inflows and debt capital inflows on systemic financial risks. In addition, this study also evaluates the effect of surges in capital inflows and capital flight on financial stability and finds that abnormal capital flows will exacerbate systemic financial risks in various countries.

Keywords: Cross-border capital inflows; Capital types; Systemic financial risks; Financial stability (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056025002126
Full text for ScienceDirect subscribers only

Related works:
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:eee:reveco:v:99:y:2025:i:c:s1059056025002126

DOI: 10.1016/j.iref.2025.104049

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().