Foreign Currency Bank Funding and Global Factors

65 Pages Posted: 1 Aug 2018

See all articles by Signe Krogstrup

Signe Krogstrup

IMF

Cédric Tille

Graduate Institute of International and Development Studies (HEI)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2018

Abstract

The literature on the drivers of capital flows stresses the prominent role of global financialfactors. Recent empirical work, however, highlights how this role varies across countries andtime, and this heterogeneity is not well understood. We revisit this question by focusing onfinancial intermediaries' funding flows in different currencies. A concise portfolio modelshows that the sign and magnitude of the response of foreign currency funding flows to globalrisk factors depend on the financial intermediary's pre-existing currency exposure. An analysisof a rich dataset of European banks' aggregate balance sheets lends support to the modelpredictions, especially in countries outside the euro area.

Keywords: Capital flows, Spillovers, Currency mismatch, push factors, cross-border transmission of shocks, European bank balance sheets, International Lending and Debt Problems, Financial Aspects of Economic Integration

JEL Classification: F32, F34, F36

Suggested Citation

Krogstrup, Signe and Tille, Cedric, Foreign Currency Bank Funding and Global Factors (May 2018). IMF Working Paper No. 18/97. Available at SSRN: https://ssrn.com/abstract=3221270

Signe Krogstrup (Contact Author)

IMF ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Cedric Tille

Graduate Institute of International and Development Studies (HEI) ( email )

PO Box 136
Geneva, CH-1211
Switzerland

HOME PAGE: http://sites.google.com/site/cedrictilleheid/home

Register to save articles to
your library

Register

Paper statistics

Downloads
19
Abstract Views
101
PlumX Metrics