Have currency-based capital flow management measures curbed international banking flows?

Annamaria de Crescenzio, Marta Golin and Francesco Molteni
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Annamaria de Crescenzio: OECD
Francesco Molteni: European University Institute

No 2017/4, OECD Working Papers on International Investment from OECD Publishing

Abstract: This paper analyses the impact of a specific type of banking regulation on operations in foreign currency, defined as currency-based capital flow management measures (CB-CFMs), on cross-border banking flows in a sample of 18 countries over the period 2005 to 2013. The results show that the introduction and tightening of these measures in the post-crisis period contributed to a reduction of the external debt of banks, controlling for capital flow management measures, domestic macro-prudential regulation, and a large set of push and pull factors. The examination of external debt by maturity and instruments suggests that these measures are more effective in curbing short-term debt and interbank borrowing, which are also the components that contracted more sharply in the aftermath of the 2008 crisis. Further analysis could look at the benefits these measures bring in terms of financial stability, and evaluate the costs of capital account openness against the risks that CB-CFMs aim to address.

Keywords: banking debt; capital flow management measures; currency-based measures; external debt; macro-prudential policies (search for similar items in EconPapers)
JEL-codes: E58 F3 F38 G28 (search for similar items in EconPapers)
Date: 2017-09-14
New Economics Papers: this item is included in nep-ban
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:oec:dafaaa:2017/4-en

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