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International bank portfolios: short- and long-run responses to the business cycle

In: Research on global financial stability: the use of BIS international financial statistics

  • Sven Blank

    (University of Tuebingen)

  • Claudia M Buch

    (University of Tuebingen and IAW)

International bank portfolios constitute a large component of international country portfolios. Yet, their response to macroeconomic conditions and their impact on the international transmission of business cycles developments remains largely unexplored. We use a novel dataset on banks’ international portfolios to answer three questions. First, what are the long-run determinants of banks’ international portfolios? Second, how do banks’ international portfolios adjust to short-run macroeconomic developments? Third, does the speed of adjustment change with the degree of financial integration? We provide evidence of significant long-run cointegration relationships between cross-border assets and liabilities of banks and key macroeconomic variables. Both, the long-run determinants of banks’ international portfolios as well as the short-run dynamics show a significant degree of heterogeneity across countries and, to some extent, over time. Gravitytype variables help explaining differences in the speed of adjustment to new equilibria.

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This chapter was published in:
  • Bank for International Settlements, 2007. "Research on global financial stability: the use of BIS international financial statistics," CGFS Papers, Bank for International Settlements, number 29, April.
  • This item is provided by Bank for International Settlements in its series CGFS Papers chapters with number 29-07.
    Handle: RePEc:bis:biscgc:29-07
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    1. De Santis, Roberto A. & Gérard, Bruno, 2006. "Financial integration, international portfolio choice and the European Monetary Union," Working Paper Series 0626, European Central Bank.
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    5. Buch, Claudia M, 2003. " Information or Regulation: What Drives the International Activities of Commercial Banks?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(6), pages 851-69, December.
    6. Linda S. Goldberg, 2002. "When Is U.S. Bank Lending to Emerging Markets Volatile?," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 171-196 National Bureau of Economic Research, Inc.
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