The risk-taking channel of international financial flows
Pietro Cova () and
Filippo Natoli ()
Additional contact information
Pietro Cova: Bank of Italy
Filippo Natoli: Bank of Italy
No GRU_2019_015, GRU Working Paper Series from City University of Hong Kong, Department of Economics and Finance, Global Research Unit
From the second half of the 1990s, the high saving propensity in emerging economies triggered massive inflows towards safe assets in the United States; then, from the early 2000s, global banks also increased investment in US markets targeting riskier securities. We investigate to what extent the global saving glut and the global banking glut have stimulated risk taking, and find significant effects on credit spreads, market volatility and bank leverage. In a VAR framework, we also detect linkages between foreign inflows, US household indebtedness and house prices, suggesting a substan- tial risk-taking channel. Our findings provide evidence of the autonomous role of foreign financial flows during the run-up to the global financial crisis.
Keywords: saving glut; banking glut; capital flows; banking leverage; risk-taking channel (search for similar items in EconPapers)
JEL-codes: F32 F33 F34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba, nep-ifn, nep-opm and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cth:wpaper:gru_2019_015
Access Statistics for this paper
More papers in GRU Working Paper Series from City University of Hong Kong, Department of Economics and Finance, Global Research Unit Contact information at EDIRC.
Bibliographic data for series maintained by GRU ().