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What Drives Cross-Border Flows?

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  • Bayangos, Veronica
  • Moreno, Ramon

Abstract

This paper examines the drivers and impact of cross-border bank financial positions in a destination emerging market economy (the Philippines) for global banks using a unique dataset of disaggregated data for 55-58 internationally active banks during the period 2015 to 2020. The data allow us to analyze the cross-border asset position of banks in the destination country, as well as the cross-border liabilities, thus going beyond the traditional focus on cross-border liabilities only. We find that global risk appetite, real exchange rate movements, return on assets and the spread between the domestic policy rate and the US Fed funds rate influence cross-border financial positions. We also find, apparently for the first time in this type of study, that the domestic credit cycle for banks in the destination country affects the cross-border asset position of banks. This effect is stronger in foreign banks. A separate analysis of how cross-border financial positions affect the domestic credit cycle reveals that these have a significant positive impact for all banks.

Suggested Citation

  • Bayangos, Veronica & Moreno, Ramon, 2021. "What Drives Cross-Border Flows?," MPRA Paper 115423, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:115423
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    References listed on IDEAS

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    More about this item

    Keywords

    cross-border bank flows; credit cycle; risk-taking;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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