Global Liquidity and Drivers of Cross-Border Bank Flows

This paper provides a definition of global liquidity consistent with its meaning as the “ease of financing” in international financial markets. Using a longer time series and broader sample of countries than in previous studies, it identifies global factors driving cross-border bank flows, alongside...

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Bibliographic Details
Main Author: Cerutti, Eugenio
Other Authors: Claessens, Stijn, Ratnovski, Lev
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2014
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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300 |a 33 pages 
651 4 |a United States 
653 |a International finance 
653 |a Depository Institutions 
653 |a Interest rates 
653 |a Credit 
653 |a Cross-border banking 
653 |a International liquidity 
653 |a Banks 
653 |a Finance 
653 |a Banks and banking 
653 |a Monetary economics 
653 |a Financial services 
653 |a Monetary Policy, Central Banking, and the Supply of Money and Credit: General 
653 |a Micro Finance Institutions 
653 |a Asset and liability management 
653 |a Mortgages 
653 |a International Lending and Debt Problems 
653 |a Yield curve 
653 |a Money 
653 |a Banks and Banking 
653 |a Banking 
653 |a Interest Rates: Determination, Term Structure, and Effects 
653 |a Money and Monetary Policy 
653 |a Finance: General 
653 |a Portfolio Choice 
653 |a Investment Decisions 
653 |a Central bank policy rate 
700 1 |a Claessens, Stijn 
700 1 |a Ratnovski, Lev 
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520 |a This paper provides a definition of global liquidity consistent with its meaning as the “ease of financing” in international financial markets. Using a longer time series and broader sample of countries than in previous studies, it identifies global factors driving cross-border bank flows, alongside country-specific factors. It confirms the explanatory power of US financial conditions, with flows decreasing in market volatility (VIX) and term premia, and increasing in bank leverage, growth in domestic credit and M2. A new finding is that similar variables for other systemic countries – the UK and the Euro Area – are also important, sometimes even more so, consistent with the dominant role of European banks in cross-border banking. Furthermore, recipient country characteristics are found to affect not only the level of country-specific flows, but also the cyclical impact of global liquidity, with sensitivities of flows to banks decreasing with stronger macroeconomic frameworks and better bank regulation, but less so for flows to non-financial firms