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The risk sensitivity of global liquidity flows: Heterogeneity, evolution and drivers

Author

Listed:
  • Avdjiev, Stefan
  • Gambacorta, Leonardo
  • Goldberg, Linda S.
  • Schiaffi, Stefano

Abstract

The period after the Global Financial Crisis (GFC) was characterized by a considerable risk migration within global liquidity flows, away from cross-border bank lending towards international bond issuance. We show that the post-GFC shifts in the risk sensitivities of global liquidity flows are related to the tightness of the balance sheet (capital and leverage) constraints faced by international (bank and non-bank) lenders and to the migration of borrowers across funding sources. We document that the risk sensitivity of global liquidity flows is higher when funding is provided by financial intermediaries that are facing greater balance sheet constraints. We also provide evidence that the post-GFC migration of borrowers from cross-border loans to international debt securities was associated with a decline in the risk sensitivity of global liquidity flows to EME borrowers.

Suggested Citation

  • Avdjiev, Stefan & Gambacorta, Leonardo & Goldberg, Linda S. & Schiaffi, Stefano, 2026. "The risk sensitivity of global liquidity flows: Heterogeneity, evolution and drivers," Journal of International Money and Finance, Elsevier, vol. 161(C).
    • Handle: RePEc:eee:jimfin:v:161:y:2026:i:c:s0261560625002001
    DOI: 10.1016/j.jimonfin.2025.103465
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    Keywords

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    JEL classification:

    • F3 - International Economics - - International Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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