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Real and Financial Vulnerabilities from Crossborder Banking Linkages

Author

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  • Kyunghun Kim
  • Ms. Srobona Mitra

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

  • Kyunghun Kim & Ms. Srobona Mitra, 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. Giannetti, Mariassunta & Laeven, Luc, 2012. "The flight home effect: Evidence from the syndicated loan market during financial crises," Journal of Financial Economics, Elsevier, vol. 104(1), pages 23-43.
    6. Martin Cihak & Sonia Munoz & Ryan Scuzzarella, 2012. "The Bright and the Dark Side of Cross-Border Banking Linkages," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(3), pages 200-225, July.
    7. Ralph De Haas & Iman Van Lelyveld, 2014. "Multinational Banks and the Global Financial Crisis: Weathering the Perfect Storm?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(s1), pages 333-364, February.
    8. 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.
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    10. Popov, Alexander & Udell, Gregory F., 2012. "Cross-border banking, credit access, and the financial crisis," Journal of International Economics, Elsevier, vol. 87(1), pages 147-161.
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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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