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Capital Flows, Cross-Border Banking and Global Liquidity

50 Pages Posted: 13 Mar 2012 Last revised: 3 Dec 2012

Valentina Bruno

American University - Department of Finance and Real Estate

Hyun Song Shin

Bank for International Settlements

Multiple version iconThere are 2 versions of this paper

Date Written: December 1, 2012

Abstract

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

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

Valentina Giulia Bruno

American University - Department of Finance and Real Estate ( email )

Kogod School of Business
4400 Massachusetts Ave., N.W.
Washington, DC 20016-8044
United States

HOME PAGE: http://www.american.edu/kogod/faculty/bruno.cfm

Hyun Song Shin (Contact Author)

Bank for International Settlements ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

HOME PAGE: http://www.bis.org/author/hyun_song_shin.htm

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