Cross-Border Bank Flows and Systemic Risk

Cross-Border Lending and the International Transmission of Banking Crises

“…Recently, the borrowing channel has been put into question by Karolyi et al (2018) predictor (Frankel & Saravelos, 2012;Kauko, 2014). In this study, I resolve the puzzle through the introduction of the cross-border bank lending channel, and I further shed light on the role of the current account.…”

Cross-border Banking and the Circumvention of Macroprudential and Capital Control Measures

“…For the local affiliate component, we further adjust the data downwards using deposit-loan ratio, following Cerutti (2015), to avoid overstating the size of bilateral local affiliate exposure when the affiliates are primarily funded by local deposits. Similar to Houston, Lin and Ma (2012) and Karolyi, Sedunov and Taboada (2017), most of our policy instruments and control variables are in annual frequency, so we use end-of-year observations to collapse our quarter banking flows dataset to annual frequency.…”

“…35.5% (4.8%) of the zeros in our direct cross-border (local affiliate) sample are driven by our requirement of positive net lending, with the 64.5% (95.2%) remaining due to the nonexistence of a bilateral lending linkage between lender and borrowers. Our dependent variable definition is different from Houston, Lin and Ma, (2012) and Karolyi, Sedunov and Taboada (2017), who use censored log differences (growth rate) of exposures-bilateral observations with growth rate above 100 percent are deleted in order to control for outliers. Our baseline definition remains consistent with our modelled two-step procedure, and alleviates concerns that observations are dropped during early years on the banking relationship between a lender and a borrower country (with small initial lending), or when there is high variability in the level of claims if we follow Houston et al (2012).…”

The Global Banking Network: What is Behind the Increasing Regionalization Trend?

“…Similarly, we also find heterogeneity across lending banking systems, as in Bouvatier and Delatte (2015), who use a generalized gravity model to show that international banking integration displays significant differences in and out of the Euro area, with the latter integration progressing and the former currently in a cycle towards the downside. More recently, Karolyi, Sedunov, and Taboada (2017), using BIS Consolidated Banking Statistics and a gravitational model as part of their estimations, find that recipient countries benefit from cross-border bank lending through improved financial stability. Brei and von Peter (2017) use BIS Locational Banking Statistics to show that similar to gravity models in trade, distance plays a significant role in bank gravity estimations, even if the physical demands of bank lending are less stringent than that of trade.…”