nep-ifn New Economics Papers
on International Finance
Issue of 2018‒10‒29
two papers chosen by
Vimal Balasubramaniam
University of Oxford

  1. Cross-border Banking and the Circumvention of Macroprudential and Capital Control Measures By Eugenio M Cerutti; Haonan Zhou
  2. House Price Synchronization and Financial Openness: A Dynamic Factor Model Approach By Mitsuru Katagiri

  1. By: Eugenio M Cerutti; Haonan Zhou
    Abstract: We analyze the joint impact of macroprudential and capital control measures on cross-border banking flows, while controlling for multidimensional aspects in lender-and-borrower-relationships (e.g., distance, cultural proximity, microprudential regulations). We uncover interesting spillover effects from both types of measures when applied either by lender or borrowing countries, with many of them most likely associated with circumvention or arbitrage incentives. While lender countries’ macroprudential policies reduce direct cross-border banking outflows, they are associated with larger outflows through local affiliates. Direct cross-border inflows are higher in borrower countries with more usage of macroprudential policies, and are linked to circumvention motives. In the case of capital controls, most spillovers seem to be present through local affiliates. We do not find evidence to support the idea that additional capital inflow controls could interact with macro-prudential policies to mitigate cross-border spillovers.
    Date: 2018–09–28
  2. By: Mitsuru Katagiri
    Abstract: This paper investigates the developments in house price synchronization across countries by a dynamic factor model using a country- and city-level dataset, and examines what drives the synchronization. The empirical results indicate that: (i) the degree of synchronization has been rising since the 1970s, and (ii) a large heterogeneity in the degree of synchronization exists across countries and cities. A panel and cross-sectional regression analysis show that the heterogeneity of synchronization is partly accounted for by the progress in financial and trade openness. Also, the city-level analysis implies that the international synchronization is mainly driven by the city-level connectivity between large and international cities.
    Keywords: Housing prices;Econometric models;Regression analysis;Housing price, Dynamic factor model, Financial openness
    Date: 2018–09–28

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