Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/bis/biswps/639.html
   My bibliography  Save this paper

Supply- and demand-side factors in global banking

Author

Listed:
  • Mary Amiti
  • Patrick McGuire
  • David E Weinstein
Abstract
What is the role for supply and demand forces in determining movements in international banking flows? Answering this question is crucial for understanding the international transmission of financial shocks and formulating policy. This paper addresses the question by using the method developed in Amiti and Weinstein (forthcoming) to exactly decompose the growth in international bank credit into common shocks, idiosyncratic supply shocks and idiosyncratic demand shocks for the period 2000-2016. A striking feature of the global banking flows data can be characterized by what we term the "Anna Karenina Principle": all healthy credit relationships are alike, each unhealthy credit relationship is unhealthy in its own way. During non-crisis years, bank flows are well-explained by a common global factor and a local demand factor. But during times of crisis flows are affected by idiosyncratic supply shocks to a borrower country's creditor banks. This has important implications for why standard models break down during crises.

Suggested Citation

  • Mary Amiti & Patrick McGuire & David E Weinstein, 2017. "Supply- and demand-side factors in global banking," BIS Working Papers 639, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:639
    as

    Download full text from publisher

    File URL: http://www.bis.org/publ/work639.pdf
    File Function: Full PDF document
    Download Restriction: no
    File URL: http://www.bis.org/publ/work639.htm
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2012. "External adjustment and the global crisis," Journal of International Economics, Elsevier, vol. 88(2), pages 252-265.
    2. Patrick McGuire & Goetz von Peter, 2012. "The Dollar Shortage in Global Banking and the International Policy Response," International Finance, Wiley Blackwell, vol. 15(2), pages 155-178, June.
    3. Cerutti, Eugenio & Hale, Galina & Minoiu, Camelia, 2015. "Financial crises and the composition of cross-border lending," Journal of International Money and Finance, Elsevier, vol. 52(C), pages 60-81.
    4. Fratzscher, Marcel, 2012. "Capital flows, push versus pull factors and the global financial crisis," Journal of International Economics, Elsevier, vol. 88(2), pages 341-356.
    5. Peek, Joe & Rosengren, Eric S, 1997. "The International Transmission of Financial Shocks: The Case of Japan," American Economic Review, American Economic Association, vol. 87(4), pages 495-505, September.
    6. Stefan Afdjiev & Zsolt Kuti & Elod Takáts, 2012. "The euro area crisis and cross-border bank lending to emerging markets," BIS Quarterly Review, Bank for International Settlements, December.
    7. Asim Ijaz Khwaja & Atif Mian, 2008. "Tracing the Impact of Bank Liquidity Shocks: Evidence from an Emerging Market," American Economic Review, American Economic Association, vol. 98(4), pages 1413-1442, September.
    8. Philip R. Lane & Gian Maria Milesi-Ferretti, 2015. "Global Imbalances and External Adjustment After the Crisis," Central Banking, Analysis, and Economic Policies Book Series, in: Claudio Raddatz & Diego Saravia & Jaume Ventura (ed.),Global Liquidity, Spillovers to Emerging Markets and Policy Responses, edition 1, volume 20, chapter 4, pages 105-142, Central Bank of Chile.
    9. Kalemli-Ozcan, Sebnem & Papaioannou, Elias & Perri, Fabrizio, 2013. "Global banks and crisis transmission," Journal of International Economics, Elsevier, vol. 89(2), pages 495-510.
    10. McCauley, Robert & McGuire, Patrick & von Peter, Goetz, 2012. "After the global financial crisis: From international to multinational banking?," Journal of Economics and Business, Elsevier, vol. 64(1), pages 7-23.
    11. Cerutti, Eugenio, 2015. "Drivers of cross-border banking exposures during the crisis," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 340-357.
    12. Gian-Maria Milesi-Ferretti & Cédric Tille, 2011. "The great retrenchment: international capital flows during the global financial crisis [‘The great trade collapse: what caused it and what does it mean?’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 26(66), pages 289-346.
    13. Valentina Bruno & Hyun Song Shin, 2015. "Cross-Border Banking and Global Liquidity," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(2), pages 535-564.
    14. Robert McCauley & Patrick McGuire & Goetz von Peter, 2010. "The architecture of global banking: from international to multinational?," BIS Quarterly Review, Bank for International Settlements, March.
    15. 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.
    16. Patrick McGuire & Philip Wooldridge, 2005. "The BIS consolidated banking statistics: structure, uses and recent enhancements," BIS Quarterly Review, Bank for International Settlements, September.
    17. Koepke, Robin, 2015. "What Drives Capital Flows to Emerging Markets? A Survey of the Empirical Literature," MPRA Paper 62770, University Library of Munich, Germany.
    18. Stefan Avdjiev & Elod Takáts, 2014. "Cross-border bank lending during the taper tantrum: the role of emerging market fundamentals," BIS Quarterly Review, Bank for International Settlements, September.
    19. Eugenio Cerutti & Stijn Claessens & Lev Ratnovski, 2017. "Global liquidity and cross-border bank flows," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 32(89), pages 81-125.
    20. Mary Amiti & David E. Weinstein, 2011. "Exports and Financial Shocks," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(4), pages 1841-1877.
    21. Naohiko Baba & Robert N McCauley & Srichander Ramaswamy, 2009. "US dollar money market funds and non-US banks," BIS Quarterly Review, Bank for International Settlements, March.
    22. Patrick McGuire & Nikola Tarashev, 2008. "Bank health and lending to emerging markets," BIS Quarterly Review, Bank for International Settlements, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Avdjiev, Stefan & Hale, Galina, 2019. "U.S. monetary policy and fluctuations of international bank lending," Journal of International Money and Finance, Elsevier, vol. 95(C), pages 251-268.
    2. Scheubel, Beatrice & Stracca, Livio & Tille, Cédric, 2019. "The global financial cycle and capital flow episodes: a wobbly link?," Working Paper Series 2337, European Central Bank.
    3. Catão, Luís & Ditzen, Jan & te Kaat, Daniel Marcel, 2023. "Global Factors in Non-core Bank Funding and Exchange Rate Flexibility," CEPR Discussion Papers 18643, C.E.P.R. Discussion Papers.
    4. Bonilla-Mejía, Leonardo & Ruiz-Sánchez, María Alejandra & Villamizar-Villegas, Mauricio, 2022. "The Leading Role of Bank Supply Shocks," Working papers 94, Red Investigadores de Economía.
    5. Becker, Chris & Ossandon Busch, Matias & Tonzer, Lena, 2021. "Macroprudential policy and intra-group dynamics: The effects of reserve requirements in Brazil," Journal of Corporate Finance, Elsevier, vol. 71(C).
    6. Shim, Ilhyock & Shin, Kwanho, 2021. "Financial stress in lender countries and capital outflows from emerging market economies," Journal of International Money and Finance, Elsevier, vol. 113(C).
    7. Avdjiev, Stefan & Aysun, Uluc & Hepp, Ralf, 2019. "What drives local lending by global banks?," Journal of International Money and Finance, Elsevier, vol. 90(C), pages 54-75.
    8. Lorenz Emter & Martin Schmitz & Marcel Tirpák, 2019. "Cross-border banking in the EU since the crisis: What is driving the great retrenchment?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(2), pages 287-326, May.
    9. Park, Cyn-Young & Shin, Kwanho, 2021. "COVID-19, nonperforming loans, and cross-border bank lending," Journal of Banking & Finance, Elsevier, vol. 133(C).
    10. Altavilla, Carlo & Boucinha, Miguel & Bouscasse, Paul, 2022. "Supply or Demand: What Drives Fluctuations in the Bank Loan Market?," Working Paper Series 2646, European Central Bank.
    11. Federico Cingano & Fadi Hassan, 2020. "International financial flows and misallocation," CEP Discussion Papers dp1697, Centre for Economic Performance, LSE.
    12. Karel Brůna & Martin Mandel, 2020. "Analýza vývoje čistých domácích a zahraničních aktiv bankovní soustavy (příklad České republiky v letech 1996-2017) [Analysis of Dynamics of Net Home and Foreign Assets of Banking Systems Using the," Politická ekonomie, Prague University of Economics and Business, vol. 2020(5), pages 489-514.
    13. Giorgio Barba Navaretti & Giacomo Calzolari & Alberto Franco Pozzolo & Maria Teresa Trentinaglia Daverio, 2019. "Few Large with Many Small: Banks Size Distribution and Cross-Border Financial Linkages," Journal of Financial Services Research, Springer;Western Finance Association, vol. 56(3), pages 229-258, December.
    14. Sánchez Serrano, Antonio, 2021. "The impact of non-performing loans on bank lending in Europe: An empirical analysis," The North American Journal of Economics and Finance, Elsevier, vol. 55(C).
    15. Catherine Koch & Eli M Remolona, 2018. "Common lenders in emerging Asia: their changing roles in three crises," BIS Quarterly Review, Bank for International Settlements, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mary Amiti & Patrick McGuire & David E. Weinstein, 2019. "International Bank Flows and the Global Financial Cycle," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 67(1), pages 61-108, March.
    2. Stijn Claessens, 2017. "Global Banking: Recent Developments and Insights from Research," Review of Finance, European Finance Association, vol. 21(4), pages 1513-1555.
    3. McCauley, Robert N. & Bénétrix, Agustín S. & McGuire, Patrick M. & von Peter, Goetz, 2019. "Financial deglobalisation in banking?," Journal of International Money and Finance, Elsevier, vol. 94(C), pages 116-131.
    4. Stijn Claessens & Neeltje van Horen, 2015. "The Impact of the Global Financial Crisis on Banking Globalization," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(4), pages 868-918, November.
    5. Stefan Avdjiev & Elod Takats, 2016. "Monetary policy spillovers and currency networks in cross-border bank lending," BIS Working Papers 549, Bank for International Settlements.
    6. Krogstrup, Signe & Tille, Cédric, 2018. "Foreign currency bank funding and global factors," Kiel Working Papers 2104, Kiel Institute for the World Economy (IfW Kiel).
    7. Niepmann, Friederike, 2015. "Banking across borders," Journal of International Economics, Elsevier, vol. 96(2), pages 244-265.
    8. Choi, Sangyup & Furceri, Davide, 2019. "Uncertainty and cross-border banking flows," Journal of International Money and Finance, Elsevier, vol. 93(C), pages 260-274.
    9. Wang, Xichen & Yan, Ji (Karena) & Yan, Cheng & Gozgor, Giray, 2021. "Emerging stock market exuberance and international short-term flows," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
    10. Sangyup Choi & Davide Furceri & Chansik Yoon, 2021. "International Fiscal-Financial Spillovers:the Effect of Fiscal Shocks on Cross-Border Bank Lending," Open Economies Review, Springer, vol. 32(2), pages 259-290, April.
    11. Stefan Avdjiev & Valentina Bruno & Catherine Koch & Hyun Song Shin, 2019. "The Dollar Exchange Rate as a Global Risk Factor: Evidence from Investment," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 67(1), pages 151-173, March.
    12. Leonardo Gambacorta & Adrian van Rixtel & Stefano Schiaffi, 2019. "Changing Business Models In International Bank Funding," Economic Inquiry, Western Economic Association International, vol. 57(2), pages 1038-1055, April.
    13. Cerutti, Eugenio & Osorio-Buitron, Carolina, 2020. "US vs. euro area: Who drives cross-border bank lending to EMs?," Journal of the Japanese and International Economies, Elsevier, vol. 57(C).
    14. Delatte, Anne-Laure & Bouvatier, Vincent, 2014. "International Banking: the Isolation of the Euro Area," CEPR Discussion Papers 10264, C.E.P.R. Discussion Papers.
    15. Doerr, Sebastian & Schaz, Philipp, 2021. "Geographic diversification and bank lending during crises," Journal of Financial Economics, Elsevier, vol. 140(3), pages 768-788.
    16. Claudia Buch & Catherine Koch & Michael Koetter, 2016. "Crises and rescues: liquidity transmission through international banks," BIS Working Papers 576, Bank for International Settlements.
    17. Eugenio Cerutti & Stijn Claessens & Andrew K. Rose, 2019. "How Important is the Global Financial Cycle? Evidence from Capital Flows," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 67(1), pages 24-60, March.
    18. Bouvatier, Vincent & Delatte, Anne-Laure, 2015. "Waves of international banking integration: A tale of regional differences," European Economic Review, Elsevier, vol. 80(C), pages 354-373.
    19. Niepmann, Friederike & Schmidt-Eisenlohr, Tim, 2017. "No guarantees, no trade: How banks affect export patterns," Journal of International Economics, Elsevier, vol. 108(C), pages 338-350.
    20. Cornelia Kerl & Friederike Niepmann, 2014. "What determines the composition of international bank flows?," Staff Reports 681, Federal Reserve Bank of New York.

    More about this item

    Keywords

    international banking; global financial crisis; supply vs demand shocks; BIS consolidated banking statistics;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bis:biswps:639. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Martin Fessler (email available below). General contact details of provider: https://edirc.repec.org/data/bisssch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.