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Have currency-based capital flow management measures curbed international banking flows?

Author

Listed:
  • Annamaria de Crescenzio

    (OECD)

  • Marta Golin

    (University of Oxford)

  • Francesco Molteni

    (European University Institute)

Abstract

This paper analyses the impact of a specific type of banking regulation on operations in foreign currency, defined as currency-based capital flow management measures (CB-CFMs), on cross-border banking flows in a sample of 18 countries over the period 2005 to 2013. The results show that the introduction and tightening of these measures in the post-crisis period contributed to a reduction of the external debt of banks, controlling for capital flow management measures, domestic macro-prudential regulation, and a large set of push and pull factors. The examination of external debt by maturity and instruments suggests that these measures are more effective in curbing short-term debt and interbank borrowing, which are also the components that contracted more sharply in the aftermath of the 2008 crisis. Further analysis could look at the benefits these measures bring in terms of financial stability, and evaluate the costs of capital account openness against the risks that CB-CFMs aim to address.

Suggested Citation

  • Annamaria de Crescenzio & Marta Golin & Francesco Molteni, 2017. "Have currency-based capital flow management measures curbed international banking flows?," OECD Working Papers on International Investment 2017/4, OECD Publishing.
    • Handle: RePEc:oec:dafaaa:2017/4-en
    DOI: 10.1787/c0cc3f28-en
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    Citations

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    Cited by:

    1. Stephanie Guichard, 2017. "10 Years after the Global Financial Crisis: What Have We Learnt About International Capital Flows?," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 8(03), pages 1-30, October.
    2. Bitar, Joseph, 2021. "Foreign Currency Intermediation: Systemic Risk and Macroprudential Regulation," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 2(2).
    3. Norring, Anni, 2022. "Taming the tides of capital: Review of capital controls and macroprudential policy in emerging economies," BoF Economics Review 1/2022, Bank of Finland.
    4. María Alejandra Amado, 2022. "Macroprudential FX Regulations: Sacrificing Small Firms for Stability?," Working Papers 2236, Banco de España.
    5. Daniel Carvalho & Etienne Lepers & Rogelio Jr Mercado, 2021. "Taming the "Capital Flows-Credit Nexus": A Sectoral Approach," Trinity Economics Papers tep0921, Trinity College Dublin, Department of Economics.
    6. Ahnert, Toni & Forbes, Kristin & Friedrich, Christian & Reinhardt, Dennis, 2021. "Macroprudential FX regulations: Shifting the snowbanks of FX vulnerability?," Journal of Financial Economics, Elsevier, vol. 140(1), pages 145-174.
    7. Kristin J. Forbes, 2020. "The International Aspects of Macroprudential Policy," NBER Working Papers 27698, National Bureau of Economic Research, Inc.
    8. Filippo Gori & Etienne Lepers & Caroline Mehigan, 2020. "Capital flow deflection under the magnifying glass," OECD Economics Department Working Papers 1613, OECD Publishing.

    More about this item

    Keywords

    banking debt; capital flow management measures; currency-based measures; external debt; macro-prudential policies;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F3 - International Economics - - International Finance
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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