Global Factors in Non-core Bank Funding and Exchange Rate Flexibility

Lu\'is A. V. Cat\~ao, Jan Ditzen and Daniel te Kaat

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Abstract: We show that fluctuations in the ratio of non-core to core funding in the banking systems of advanced economies are largely driven by three global factors of both real and financial natures, with country-specific factors playing only a minor role. Exchange rate flexibility helps insulate the non-core to core ratio from such global factors. This insulation is stronger in periods away from global crises. Tighter prudential regulations appear to have a complementary effect to exchange rate insulation.

Date: 2023-10, Revised 2025-04
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-ifn and nep-opm
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Working Paper: Global Factors in Non-core Bank Funding and Exchange Rate Flexibility (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2310.11552

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