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Real and Financial Vulnerabilities from Crossborder Banking Linkages

Author

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  • Ms. Srobona Mitra
  • Kyunghun Kim

Abstract

This paper looks at the vulnerabilities stemming from banking sector linkages between countries and their macroeconomic effects. It finds that credit risks (from a banking system’s claims on other countries) and funding risks (from a banking system’s liabilities to another) have declined over the past five years. It also finds that funding vulnerabilities have real effects. During normal times, funding vulnerabilities are associated with significant positive GDP growth surprises. During crisis times, funding vulnerabilities are associated with significant negative GDP growth surprises. The results tell us that policymakers should pay more attention to understanding crossborder funding risks.

Suggested Citation

  • Ms. Srobona Mitra & Kyunghun Kim, 2014. "Real and Financial Vulnerabilities from Crossborder Banking Linkages," IMF Working Papers 2014/136, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2014/136
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    References listed on IDEAS

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    5. Mr. Eugenio M Cerutti, 2013. "Banks’ Foreign Credit Exposures and Borrowers’ Rollover Risks Measurement, Evolution and Determinants," IMF Working Papers 2013/009, International Monetary Fund.
    6. Nicola Cetorelli & Linda S Goldberg, 2011. "Global Banks and International Shock Transmission: Evidence from the Crisis," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 59(1), pages 41-76, April.
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    Cited by:

    1. Kyoungsoo Yoon & Jayoung Kim, 2015. "Costs of Foreign Capital Flows in Emerging Market Economies: Unexpected Economic Growth and Increased Financial Market Volatility," Working Papers 2015-21, Economic Research Institute, Bank of Korea.

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