Cross-Border Effects of Regulatory Spillovers: Evidence from Mexico

63 Pages Posted: 1 Nov 2017

Date Written: October 20, 2017

Abstract

I study the spillover of a macroprudential regulation in Spain to the Mexican financial system via Mexican subsidiaries of Spanish banks. The spillover caused a drop in the supply of household credit in Mexico. Municipalities with a higher exposure to Spanish subsidiaries experienced a larger contraction in household credit. These localized contractions caused a drop in macroeconomic activity in the local non-tradable sector. Estimates of the elasticity of loan-demand by the non-tradable sector to changes in household credit supply range from 1.6–3.5. These results emphasize the potential for cross-border effects of regulations in the presence of global banks.

Keywords: Regulatory Spillovers, Capital Shock, Household Credit

JEL Classification: F36, F42, G21

Suggested Citation

Tripathy, Jagdish, Cross-Border Effects of Regulatory Spillovers: Evidence from Mexico (October 20, 2017). Bank of England Working Paper No. 684, Available at SSRN: https://ssrn.com/abstract=3062489 or http://dx.doi.org/10.2139/ssrn.3062489

Jagdish Tripathy (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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