Financial Spillovers to Chile

October 24, 2012

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 quantifies financial spillovers from global risk factors to banks’ funding costs in Chile. It decomposes Chilean banks’ bond and interbank spreads into domestic and external factors. The results suggest moderate spillovers. On average, global spillovers pushed up bank bond and interbank spreads in Chile by about 50 basis points in 2008–12. While in 2008–09, most spillovers originated in the U.S., in mid-2010 onwards, European distress played a prominent role.

Subject: Banking, Credit default swap, Credit risk, Financial markets, Financial regulation and supervision, Financial services, Interbank markets, Money, Securities markets, Yield curve

Keywords: bank, bond credit spread, counterparty risk, credit default risk, Credit default swap, Credit risk, Credit Spread, crisis liquidity facility, efficiency ratio, Euro interbank market, Euro interbank market rate, Europe, Financial Spillover, Global, interbank market, Interbank Market Spread, Interbank markets, liquidity, liquidity factor, liquidity premia, market liquidity, market pressure, market spread, Securities markets, WP, Yield curve

Pages:
17
Volume:
2012
DOI:
https://doi.org/10.5089/9781475552195.001
Issue:
254
Series:
Working Paper No. 2012/254
Stock No:
WPIEA2012254
ISBN:
9781475552195
ISSN:
1018-5941

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