Capital Flows, Cross-Border Banking and Global Liquidity
American University - Department of Finance and Real Estate
Hyun Song Shin
Bank for International Settlements; Princeton University - Department of Economics
December 1, 2012
AFA 2013 San Diego Meetings Paper
We investigate the role of global factors in driving cross-border capital flows. We formulate a model of gross capital flows through the banking sector and derive a closed form solution that highlights the leverage cycle of global banks and its interaction with recipient country characteristics. We test the predictions of our model in a panel study of 46 developed and emerging economies and find empirical support for the key predictions of our model.
Number of Pages in PDF File: 50
Keywords: Gross capital flows, leverage, credit booms and busts
JEL Classification: F32, F33, F34working papers series
Date posted: March 13, 2012 ; Last revised: December 3, 2012
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