The Impact of Regulatory Requirements on the Banking Flows to Emerging Countries
36 Pages Posted: 4 Jun 2016 Last revised: 3 Mar 2017
Date Written: March 31, 2016
The strengthening of regulatory requirements, along with evolution in banking regulations, can have a negative impact on the external bank financing of emerging countries heavily dependent on this type of financing. Indeed, several studies have aroused fears about the potential effects of significant regulatory adjustments on bank lending to emerging markets. This paper presents a trial to estimate the sensitivity of the banking flows to increased regulatory requirements. We adopt a macroeconomic approach based on the determinants of cross-border banking claims flows from banks located in 19 developed countries to 37 emerging countries. The results of the GMM estimation confirm the negative impact of regulatory requirements on the banking flows to emerging countries, the positive impact of business openness and the significant effect of bank financialization on banking flows to these countries. The results also show that countries rated as speculative grade are influenced by the regulatory requirements, unlike countries rated in investment grade category..
Keywords: bank flows, emerging countries, pull and push factors, regulatory requirements
JEL Classification: F21, F34, G18
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