Global Liquidity and Drivers of Cross-Border Bank Flows
IMF Working Papers, April 29, 2014
Source details
- Canonical URL
- Global Liquidity and Drivers of Cross-Border Bank Flows
Other formats
Bibliographic details
- Authors: Eugenio M Cerutti, Stijn Claessens, Lev Ratnovski
- Published: April 29, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475517729.001
Definition and approach
- Provides a definition of global liquidity consistent with its meaning as the “ease of financing” in international financial markets.
- Uses a longer time series and broader sample of countries than in previous studies to identify global factors driving cross-border bank flows, alongside country-specific factors.
Main empirical findings
- Confirms the explanatory power of US financial conditions for cross-border bank flows:
- Flows decrease in market volatility (VIX).
- Flows decrease in term premia.
- Flows increase in bank leverage.
- Flows increase in growth in domestic credit.
- Flows increase in M2.
- New finding: similar variables for other systemic countries are also important:
- The UK and the Euro Area variables matter, sometimes even more so than US variables, consistent with the dominant role of European banks in cross-border banking.
- Recipient country characteristics affect both the level of country-specific flows and the cyclical impact of global liquidity:
- Sensitivities of flows to banks decrease with stronger macroeconomic frameworks.
- Sensitivities of flows to banks decrease with better bank regulation.
- The dampening effect from stronger frameworks and regulation is less pronounced for flows to non-financial firms.
Subject areas and keywords (as stated)
- Subject: Asset and liability management, Banking, Central bank policy rate, Credit, Cross-border banking, Financial services, International liquidity, Money, Yield curve
- Keywords: bank, bank borrower, bank claim, bank leverage, bank risk-taking, Central bank policy rate, Credit, cross-border bank flow, Cross-border banking, exchange rate, F21, F34, G15, G18, G21, G28, Global, International liquidity, WP, Yield curve
Content in this bundle
- PDP-Working Paper