50 Pages Posted: 13 Mar 2012 Last revised: 3 Dec 2012
Date Written: December 1, 2012
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.
Keywords: Gross capital flows, leverage, credit booms and busts
JEL Classification: F32, F33, F34
Suggested Citation: Suggested Citation
Bruno, Valentina and Shin, Hyun Song, Capital Flows, Cross-Border Banking and Global Liquidity (December 1, 2012). AFA 2013 San Diego Meetings Paper. Available at SSRN: https://ssrn.com/abstract=2020556 or http://dx.doi.org/10.2139/ssrn.2020556