Portfolio Inflows Eclipsing Banking Inflows: Alternative Facts?

IMF Working Papers, February 16, 2018

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Portfolio Inflows Eclipsing Banking Inflows: Alternative Facts?

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Bibliographic details

• Authors: Eugenio M Cerutti, Gee Hee Hong
• Published: February 16, 2018
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781484341964.001

Summary findings

• Superficial examination of aggregate gross cross-border capital inflow data suggests that there was no substitution between portfolio inflows and bank loans in recent years.
• Novel analysis of disaggregate inflows (both by types of instrument and borrower) reveals heterogeneity:
  • Substitution of bank loans for portfolio debt securities for:
  • Corporate borrowers in advanced countries.
  • Sovereign borrowers in advanced countries.
  • Sovereign borrowers in emerging countries.
  • Complementarity across types of gross capital inflows for corporate borrowers in emerging markets, particularly during periods of positive capital gross inflows after the global financial crisis.
• A large part of these patterns does not appear to be driven by a common phenomenon across countries associated with the global financial cycle, but rather by country-specific factors.

Analysis and interpretation

• Disaggregation by instrument type and borrower type uncovers relationships between bank loans and portfolio debt securities that are obscured in aggregate gross inflow series.
• Heterogeneous behavior across borrower types and country groups:
  • Advanced-country corporates and sovereigns: evidence consistent with substitution (bank loans replacing portfolio debt securities).
  • Emerging-market sovereigns: evidence consistent with substitution.
  • Emerging-market corporates: evidence consistent with complementarity, notably in post-global financial crisis episodes of positive gross inflows.
• The observed patterns imply that global financial cycle dynamics are not the predominant driver; instead, country-specific factors play a substantial role.

Key statistics and publication metadata

• Pages: 34
• Volume: 2018
• Issue: 029
• Series: Working Paper No. 2018/029
• DOI: https://doi.org/10.5089/9781484341964.001
• Stock No: WPIEA2018029
• ISBN: 9781484341964
• ISSN: 1018-5941

Subjects and keywords

• Subjects: Balance of payments, Capital flows, Capital inflows, Financial institutions, Loans, Securities, Stocks
• Keywords: AE corporate, bank inflows, borrower type, capital flows, Capital inflows, debt inflow, debt optimization operation, factor loading, Global, global financial cycle, investment loan, loan inflow, Loans, portfolio debt, portfolio inflows, Securities, Stocks, WP

IMF Working Paper No. 2018/029 (2018), Eugenio M Cerutti and Gee Hee Hong.

Content in this bundle

• Portfolio Inflows Eclipsing Banking Inflows: Alternative Facts?, WP/18/29, January 2018
  • Portfolio Inflows Eclipsing Banking Inflows: Alternative Facts?, WP/18/29, January 2018 (Markdown version)
  • Portfolio Inflows Eclipsing Banking Inflows: Alternative Facts?, WP/18/29, January 2018 (PDF)