International Bank Portfolios: Short- and Long-Run Responses to Macroeconomic Conditions

18 Pages Posted: 12 Apr 2010

See all articles by Sven Blank

Sven Blank

Deutsche Bundesbank - Research Centre

Claudia M. Buch

Deutsche Bundesbank

Abstract

International bank portfolios constitute a large component of international country portfolios. Yet, banks' response to international macroeconomic conditions remains largely unexplored. We use a novel dataset on banks' international portfolios to answer three questions. First, what are the long-run determinants of banks' international portfolios? Second, how do banks' international portfolios adjust to short-run macroeconomic developments? Third, does the speed of adjustment change with the degree of financial integration? We find that, in the long-run, market size has a positive impact on foreign assets and liabilities. An increase in the interest differential between the home and the foreign economy lowers foreign assets and increases foreign liabilities. Foreign trade has a positive impact on international bank portfolios, which is independent from the effect of other macroeconomic variables. Short-run dynamics show heterogeneity across countries, but these dynamics can partly be explained with gravity-type variables.

Suggested Citation

Blank, Sven and Buch, Claudia M., International Bank Portfolios: Short- and Long-Run Responses to Macroeconomic Conditions. Review of International Economics, Vol. 18, No. 2, pp. 289-306, May 2010. Available at SSRN: https://ssrn.com/abstract=1587134 or http://dx.doi.org/10.1111/j.1467-9396.2010.00858.x

Sven Blank (Contact Author)

Deutsche Bundesbank - Research Centre ( email )

Wilhelm-Epstein-Str. 14
D-60431 Frankfurt/Main
Germany

Claudia M. Buch

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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