Financial Integration and the Great Leveraging

Daniel Carvalho

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: This paper studies how international capital flows affect domestic credit and money holdings. While previous studies have focused on credit growth and highlighted the importance of the equity/debt mix of flows, this paper shows that there are also important implications of flows going to different domestic recipient sectors, especially concerning money dynamics. In particular, cross-border banking flows display a strong comovement with credit but none with broad money; in turn, flows of domestic non-banks display comovement with both credit and money. For this reason, banking flows correlate with the decoupling of these two variables – the Great Leveraging –, a stylised fact documented for several economies in the past decades and associated to the rapid expansion of banks non-monetary liabilities. These results thus shed light on the mechanisms through which the international banking activity might have consequences for the composition of the domestic bank balance sheet.

JEL-codes: E44 F30 G15 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-ban, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
https://www.bportugal.pt/sites/default/files/anexos/papers/wp201407.pdf

Related works:
Journal Article: Financial integration and the Great Leveraging (2019)
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:ptu:wpaper:w201407

Access Statistics for this paper

More papers in Working Papers from Banco de Portugal, Economics and Research Department Contact information at EDIRC.
Bibliographic data for series maintained by DEE-NTD ().