Cross-Border Banking and Global Liquidity

47 Pages Posted: 12 Sep 2014

See all articles by Valentina Bruno

Valentina Bruno

American University - Department of Finance and Real Estate

Hyun Song Shin

Bank for International Settlements (BIS)

Date Written: September 2014

Abstract

We investigate global factors associated with bank capital flows. We formulate a model of the international banking system where global banks interact with local banks. The solution highlights the bank leverage cycle as the determinant of the transmission of financial conditions across borders through banking sector capital flows. A distinctive prediction of the model is that local currency appreciation is associated with higher leverage of the banking sector, thereby providing a conceptual bridge between exchange rates and financial stability. In a panel study of 46 countries, we find support for the key predictions of our model.

Keywords: cross-border banking flows, bank leverage, global banks

JEL Classification: F32, F33, F34

Suggested Citation

Bruno, Valentina Giulia and Shin, Hyun Song, Cross-Border Banking and Global Liquidity (September 2014). BIS Working Paper No. 458. Available at SSRN: https://ssrn.com/abstract=2495003

Valentina Giulia Bruno (Contact Author)

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

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

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

Register to save articles to
your library

Register

Paper statistics

Downloads
95
Abstract Views
810
rank
270,637
PlumX Metrics