Capital Flows, Cross-Border Banking and Global Liquidity

Valentina Bruno, Hyun Song Shin

NBER Working Paper No. 19038
Issued in May 2013
NBER Program(s):   CF   IFM

We investigate global factors associated with cross-border capital flows. We formulate a model of gross capital flows through the international banking system and derive a closed form solution that highlights the leverage cycle of global banks as being a prime determinant of the transmission of financial conditions across borders. We then test the predictions of our model in a panel study of 46 countries and find that global factors dominate local factors as determinants of banking sector capital flows.

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Document Object Identifier (DOI): 10.3386/w19038

Published: Journal of Monetary Economics Volume 71, April 2015, Pages 119–132 Cover image Capital flows and the risk-taking channel of monetary policy Valentina Brunoa, Hyun Song Shinb, ,

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