International Bank Portfolios: Short- and Long-Run Responses to the Business Cycle

48 Pages Posted: 8 May 2007

See all articles by Sven Blank

Sven Blank

Deutsche Bundesbank - Research Centre

Claudia M. Buch

Deutsche Bundesbank

Date Written: March 2007

Abstract

International bank portfolios constitute a large component of international country portfolios. Yet, their response to macroeconomic conditions and their impact on the international transmission of business cycles developments remains largely unexplored. We use a novel dataset on banks' international portfolios to answer three questions. First, what are the long-run determinants of banks' international portfolios? Second, how do banks' international portfolios adjust to short-run macroeconomic developments? Third, does the speed of adjustment change with the degree of financial integration? We provide evidence of significant long-run cointegration relationships between cross-border assets and liabilities of banks and key macroeconomic variables. Both, the long-run determinants of banks' international portfolios as well as the short-run dynamics show a significant degree of heterogeneity across countries and, to some extent, over time. Gravity-type variables help explaining differences in the speed of adjustment to new equilibria.

Keywords: international bank portfolios, macroeconomic developments, transmission channels

JEL Classification: F32, F42, F34

Suggested Citation

Blank, Sven and Buch, Claudia M., International Bank Portfolios: Short- and Long-Run Responses to the Business Cycle (March 2007). Available at SSRN: https://ssrn.com/abstract=985070 or http://dx.doi.org/10.2139/ssrn.985070

Sven Blank

Deutsche Bundesbank - Research Centre ( email )

Wilhelm-Epstein-Str. 14
D-60431 Frankfurt/Main
Germany

Claudia M. Buch (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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