Real and Financial Vulnerabilities from Crossborder Banking Linkages
26 Pages Posted: 25 Aug 2014
Date Written: July 2014
This paper looks at the vulnerabilities stemming from banking sector linkages between countries and their macroeconomic effects. It finds that credit risks (from a banking system’s claims on other countries) and funding risks (from a banking system’s liabilities to another) have declined over the past five years. It also finds that funding vulnerabilities have real effects. During normal times, funding vulnerabilities are associated with significant positive GDP growth surprises. During crisis times, funding vulnerabilities are associated with significant negative GDP growth surprises. The results tell us that policymakers should pay more attention to understanding crossborder funding risks.
Keywords: Banking systems, Cross-border banking, Interconnectedness, Credit risk, External shocks, Cross country analysis, Network Linkages, Banking, Funding Risks, Credit Risks, GDP surprises., banking system, gdp growth, growth rate, gdp growth rate, banking network, banking sector, real gdp, bank for international settlements, banking crisis, bank funding, banking channels, bank credit, banking statistics, banking crises
JEL Classification: G01, G15, G21
Suggested Citation: Suggested Citation