The Determinants of Cross-Border Bank Flows to Emerging Markets: New Empirical Evidence on the Spread of Financial Crises

Herrmann, Sabine; Mihaljek, Dubravko

doi:10.2139/ssrn.1645258

Cited by 41 publications

(18 citation statements)

References 39 publications

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“…Broner et al (2013) also found that gross capital flows are very large and volatile, 42 In addition to the growing trend toward integration of world capital markets and changes in policies and prospects in the recipient countries, global cyclical factors have also played an important role in explaining fluctuations in capital flows, especially short-term flows. See Agénor and Montiel (2015, Chapter 13) for a review of the evidence on the determinants of capital flows, Forbes and Warnock (2012), Herrmann and Mihaljek (2013), Okada (2013), Ahmed and Zlate (2014), and Ghosh et al (2014) for an analysis of the role of global and domestic factors in explaining "waves" of international capital flows over large samples, and Fratzscher (2012) for a more specific study of the importance of push and pull factors before and after the global financial crisis. 43 Using panel data covering the period 1975-97, Hutchison and Noy (2006), for instance, found that currency crises lead to reductions in output of about 5-8 percent over a two-to-four year period, whereas banking crises lead to output reductions on the order of 8-10 percent over the same period.…”

Section: Appendix: External Shocks Capital Flows and Financial Instmentioning

confidence: 99%

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Reserve Requirements and Loan Loss Provisions as Countercyclical Macroprudential Instruments: A Perspective from Latin America

Silva¹,

Agénor²

2016

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work is licensed under a Creative Commons IGO 3.0 AttributionNonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose. No derivative work is allowed.Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.Note that link provided above includes additional terms and conditions of the license.The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent.http://www.iadb.org 2016 Abstract * This paper discusses, from an analytical and operational perspective, the use of reserve requirements and loan loss provisions as countercyclical macroprudential instruments. In recent years both of these instruments have been used extensively in Latin America and elsewhere in the world. The first part of the paper sets the stage with a discussion of the rationale, in the presence of financial frictions, for using macroprudential regulation to mitigate financial system procyclicality. The second part reviews the general arguments, as well as the recent empirical evidence for Latin America, associated with the use of reserve requirements and loan loss provisions. The third part provides a normative analysis of the ways through which countercyclical reserve requirements and cyclically adjusted (or, more commonly called, dynamic) provisioning rules should be formulated, independently and jointly, to address concerns arising from procyclicality and financial volatility. Optimal countercyclical rules are discussed from the perspective of how these rules can either minimize a composite measure of economic volatility (combining measures of both macroeconomic and financial volatility) or maximize social welfare. The last part brings together the lessons for policymakers that can be drawn from the analysis. JEL classifications: E51, E58, G28

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Section: Appendix: External Shocks Capital Flows and Financial Instmentioning

confidence: 99%

“…See Herrmann and Mihaljek (2013) for some formal evidence on the role of bank lending flows in transmitting financial shocks across borders. 45 See also Hoggarth, Mahdeva and Martin (2010).…”

mentioning

confidence: 99%

Reserve Requirements and Loan Loss Provisions as Countercyclical Macroprudential Instruments: A Perspective from Latin America

Silva¹,

Agénor²

2016

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“…Our research question is closely related to the growing literature on the determinants of crossborder bank flows, such as Bruno and Shin (2014), Avdjiev, Kuti, and Takáts (2012), Hermann and Mihaljek (2010), and Takáts (2010), which suggests that such flows are driven both by global factors and local (i.e., country-specific) factors. Since bank-intermediated trade finance is a subset of total cross-border bank flows, our empirical specification and choice of explanatory variables are also guided by the above literature.…”

Section: Empirical Frameworkmentioning

confidence: 93%

What Drives Bank-Intermediated Trade Finance? Evidence from Cross-Country Analysis

Serena

Vasishtha

2015

SSRN Journal

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“…Although this type of vulnerability was not in focus before the crisis, it created significant liquidity problems after. The problem occurred when parent banks decided to withdraw funds from these markets so they could consolidate at home (Herrmann and Mihaljek, 2010). This spillover had several implications.…”

Section: The Crisis Periodmentioning

confidence: 99%

The effects of intercompany lending on the current account balances of selected economies in the Western Balkans

Durovic¹

2017

pse

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The Determinants of Cross-Border Bank Flows to Emerging Markets: New Empirical Evidence on the Spread of Financial Crises

Cited by 41 publications

References 39 publications

Reserve Requirements and Loan Loss Provisions as Countercyclical Macroprudential Instruments: A Perspective from Latin America

Reserve Requirements and Loan Loss Provisions as Countercyclical Macroprudential Instruments: A Perspective from Latin America

What Drives Bank-Intermediated Trade Finance? Evidence from Cross-Country Analysis

The effects of intercompany lending on the current account balances of selected economies in the Western Balkans

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