Real and Financial Vulnerabilities from Crossborder Banking Linkages

Author/Editor:

Kyunghun Kim ; Srobona Mitra

Publication Date:

July 25, 2014

Electronic Access:

Free Full text (PDF file size is 814 KB).Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper looks at the vulnerabilities stemming from banking sector linkages between countries and their macroeconomic effects. It finds that credit risks (from a banking system’s claims on other countries) and funding risks (from a banking system’s liabilities to another) have declined over the past five years. It also finds that funding vulnerabilities have real effects. During normal times, funding vulnerabilities are associated with significant positive GDP growth surprises. During crisis times, funding vulnerabilities are associated with significant negative GDP growth surprises. The results tell us that policymakers should pay more attention to understanding crossborder funding risks.

Series:

Working Paper No. 14/136

Subject:

English

Publication Date:

July 25, 2014

ISBN/ISSN:

9781498369060/1018-5941

Stock No:

WPIEA2014136

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

25

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