Foreign Currency Bank Funding and Global Factors
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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. 2018/097
Subject:
Balance of payments Banking Capital flows Currencies Exchange rate risk Financial regulation and supervision Financial statements Foreign currency exposure Money Public financial management (PFM)
English
Publication Date:
May 9, 2018
ISBN/ISSN:
9781484353660/1018-5941
Stock No:
WPIEA2018097
Pages:
64
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