nep-ifn New Economics Papers
on International Finance
Issue of 2017‒03‒19
three papers chosen by
Vimal Balasubramaniam
University of Oxford

  1. Changing business models in international bank funding By Leonardo Gambacorta; Adrian Van Rixtel; Stefano Schiaffi
  2. Hoarding international reserves and global liquidity expansion, what are the links and do they matter? By Nady Rapelanoro
  3. Observables and residuals: exploring cross-border differences in Small and Medium Enterprise borrowing costs By Carroll, James; McCann, Fergal

  1. By: Leonardo Gambacorta; Adrian Van Rixtel; Stefano Schiaffi
    Abstract: This paper investigates the foreign funding mix of globally active banks. Using BIS international banking statistics for a panel of 12 advanced economies, we detect a structural break in international bank funding at the onset of the global financial crisis. In their post-break business model, banks rely less on cross-border liabilities and, instead, tap funds from outside their jurisdictions by making more active use of their subsidiaries and branches, as well as inter-office accounts within the same banking group.
    Keywords: bank funding, structural reform initiatives, international banks
    Date: 2017–03
  2. By: Nady Rapelanoro
    Abstract: Global liquidity expansion raises concerns amongst regulators and policy makers, especially since its evolution is closely related to destabilizing phenomena’s, particularly for the financial sector. Despite that those effects are largely investigated in the advanced countries, the literature is scarce concerning the effects for the emerging and developing economies. In this paper, our objective is to investigate the links between the hoarding reserves observed in the Asian emerging economies and the development of the global liquidity conditions in the core countries. For this purpose, we study the theoretical relationships between the two phenomena and provide an empirical approach that evaluates the influences of the growing demand for reserves in the emerging countries into the main reserves issuing country. We particularly focus on macroeconomics consequences and the effects on the developments of global liquidity conditions.
    Keywords: SVARs, Global liquidity, Emerging countries, International reserves.
    JEL: C32 E42 E43 F41
    Date: 2017
  3. By: Carroll, James (Trinity College Dublin); McCann, Fergal (Central Bank of Ireland)
    Abstract: Cross-country comparisons of average loan interest rates, often carried out using statistics provided by national and international authorities, should be accompanied by strong caveats. If underlying compositional differences in loans, borrowers or lenders are unaccounted for, claims of over/under-pricing may be unfounded. In this paper, we propose a simple methodology that compares interest rates between countries after controlling for such differences. We apply our method to loan-level data from three Irish banks operating in both Ireland and the UK. We find that controlling for such factors reduces the the cross-country interest rate premium significantly. We attribute any remaining interest rate “gap” to overall lending market conditions – for example, to differences in the recoverability of collateral, the level of competition among banks, the aggregate perception of risk, or banks’ expectations on the relative movements in policy rates and exchange rates between the UK and the euro area.
    Keywords: SME, loan-level data, interest rate differentials
    Date: 2017–01

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