Foreign Currency Bank Funding and Global Factors

Author/Editor:

Signe Krogstrup ; Cédric Tille

Publication Date:

May 9, 2018

Electronic Access:

Free Full Text. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

The literature on the drivers of capital flows stresses the prominent role of global financial factors. Recent empirical work, however, highlights how this role varies across countries and time, and this heterogeneity is not well understood. We revisit this question by focusing on financial intermediaries’ funding flows in different currencies. A concise portfolio model shows that the sign and magnitude of the response of foreign currency funding flows to global risk factors depend on the financial intermediary’s pre-existing currency exposure. An analysis of a rich dataset of European banks’ aggregate balance sheets lends support to the model predictions, especially in countries outside the euro area.

Series:

Working Paper No. 18/97

Subject:

English

Publication Date:

May 9, 2018

ISBN/ISSN:

9781484353660/1018-5941

Stock No:

WPIEA2018097

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

59

Please address any questions about this title to publications@imf.org