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What is the Major Determinant of Credit Flows through Cross-Border Banking?

Toyoichiro Shirota

No 13-E-5, Bank of Japan Working Paper Series from Bank of Japan

Abstract: This paper examines the major determinant of the cross-border credit flows from global banks toward 70 vis-a-vis countries in seven regions of the world. Employing a Bayesian dynamic latent factor model, we decompose the volatilities of banking flows into the contribution of the global-common factor, the regional-common factor, and the national-specific factor. The results indicate that the global-common factor explains 36.4 percent of volatilities in overall cross-border banking flow, suggesting that the international propagations of shocks through global banks are quantitatively important. Especially, the contribution of the global-common factor is increasing in the 2000s. At the same time, main determinants are largely heterogeneous across countries. This heterogeneity implies that the desirable policy response to credit inflows could be different for each host country.

Keywords: International Capital Flows; Dynamic Latent Factor; Bayesian Estimation (search for similar items in EconPapers)
JEL-codes: C11 F3 (search for similar items in EconPapers)
Date: 2013-03-19
New Economics Papers: this item is included in nep-ban, nep-ifn and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:boj:bojwps:13-e-5

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