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Capital Flows, Maturity Mismatches, and Profitability in Emerging Markets: Evidence From Bank Level Data

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  • Uluc Aysun

    () (University of Connecticut, USA)

Abstract

Despite the extensive work on currency mismatches, research investigating the significance of maturity mismatches in emerging market economies is scarce. In particular, how capital flows affect maturity mismatches, and the significance of these mismatches for financial health during crisis and non-crisis periods have not been investigated as thoroughly. In this paper, I show that emerging market banks' maturity mismatches are positively related to capital flows and that maturity mismatches play a key role in determining external vulnerability. Specifically, using bank level data, I find that maturity mismatches significantly increase during periods of high capital inflows, and banks with high maturity mismatches report larger losses if there is a capital reversal -despite being more profitable in more tranquil periods —. Finally, I also propose a simple partial equilibrium framework that is convenient for analyzing the effects of maturity mismatches.

Suggested Citation

  • Uluc Aysun, 2012. "Capital Flows, Maturity Mismatches, and Profitability in Emerging Markets: Evidence From Bank Level Data," Journal of Developing Areas, Tennessee State University, College of Business, vol. 46(1), pages 211-239, January-J.
  • Handle: RePEc:jda:journl:vol.46:year:2012:issue1:pp:211-239
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    Cited by:

    1. Diana Sadoveanu, 2012. "Dealing with the Challenges of Capital Inflows: The case of Romania," Proceedings of FIKUSZ '12, in: Pál Michelberger (ed.),Proceedings of FIKUSZ '12, pages 81-90, Óbuda University, Keleti Faculty of Business and Management.

    More about this item

    Keywords

    maturity mismatches; capital flows; profitability; financial ratios; ban- level data;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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