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What is the Major Determinant of Credit Flows through Cross-Border Banking?

Author

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  • Toyoichiro Shirota

    (Bank of Japan)

Abstract

This paper examines the major determinant of the cross-border credit flows from global banks toward 70 vis-a-vis countries in seven regions of the world. Employing a Bayesian dynamic latent factor model, we decompose the volatilities of banking flows into the contribution of the global-common factor, the regional-common factor, and the national-specific factor. The results indicate that the global-common factor explains 36.4 percent of volatilities in overall cross-border banking flow, suggesting that the international propagations of shocks through global banks are quantitatively important. Especially, the contribution of the global-common factor is increasing in the 2000s. At the same time, main determinants are largely heterogeneous across countries. This heterogeneity implies that the desirable policy response to credit inflows could be different for each host country.

Suggested Citation

  • Toyoichiro Shirota, 2013. "What is the Major Determinant of Credit Flows through Cross-Border Banking?," Bank of Japan Working Paper Series 13-E-5, Bank of Japan.
  • Handle: RePEc:boj:bojwps:13-e-5
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Yoshiyuki Fukuda & Yuki Kimura & Nao Sudo & Hiroshi Ugai, 2013. "Cross-country Transmission Effect of the U.S. Monetary Shock under Global Integration," Bank of Japan Working Paper Series 13-E-16, Bank of Japan.
    2. Waikei R Lam, 2013. "Cross-border Activity of Japanese Banks," IMF Working Papers 13/235, International Monetary Fund.
    3. Shirota, Toyoichiro, 2015. "What is the major determinant of cross-border banking flows?," Journal of International Money and Finance, Elsevier, vol. 53(C), pages 137-147.
    4. Eickmeier, Sandra & Gambacorta, Leonardo & Hofmann, Boris, 2014. "Understanding global liquidity," European Economic Review, Elsevier, vol. 68(C), pages 1-18.

    More about this item

    Keywords

    International Capital Flows; Dynamic Latent Factor; Bayesian Estimation;

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • F3 - International Economics - - International Finance

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