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Funding Shocks through Cross-border Banking in Asia A Network-based Approach

Author

Listed:
  • Estelle Xue Liu

    (IMF)

  • Zijun Liu

    (HKMA)

Abstract

In recognition of the potential risk arising from the rapidly increasing cross-border interbank funding in Asia, we examine the contagion of funding shocks through the regional interbank network. We find that the breadth and the final impact of the shock crucially hinge on the magnitude of the shock, initial liquidity buffers and the structure of the interbank network. Liquidity hoarding during financial distress aggravates the severity of the shock, while the interconnectedness of the interbank network may either aggravate or mitigate the shock depending on the size of the shock.

Suggested Citation

  • Estelle Xue Liu & Zijun Liu, 2018. "Funding Shocks through Cross-border Banking in Asia A Network-based Approach," GRU Working Paper Series GRU_2018_019, City University of Hong Kong, Department of Economics and Finance, Global Research Unit.
    • Handle: RePEc:cth:wpaper:gru_2018_019
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    File URL: https://www.cb.cityu.edu.hk/ef/doc/GRU/WPS/GRU%232018-019%20Liu.pdf
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    More about this item

    Keywords

    funding runs; interbank; network analysis; financial crisis; liquidity ratio; Asia;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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