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Uncertainty Shocks and the Cross-Border Funding of Banks: Unmasking Heterogeneity

Author

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  • Agustin Benetrix

    (Department of Economics, Trinity College Dublin)

  • Michael Curran

    (Department of Economics, Villanova University)

Abstract

This paper looks at the relation between uncertainty shocks and cross-border funding of banks through the lens of a new dataset. Our key innovation is to study the impact of uncertainty measures based on volatility, newspapers, and professional forecast surveys. We provide a comprehensive assessment of how cross-border liabilities in different banking systems respond to the uncertainty type, funding sector, country, and period. We show that the contraction of bank funding can be large and quite different along these dimensions. Volatility-based uncertainty and non-bank funding display the strongest results, with news-based uncertainty mattering most outside the Global Financial Crisis.

Suggested Citation

  • Agustin Benetrix & Michael Curran, 2020. "Uncertainty Shocks and the Cross-Border Funding of Banks: Unmasking Heterogeneity," Trinity Economics Papers tep0920, Trinity College Dublin, Department of Economics.
    • Handle: RePEc:tcd:tcduee:tep0920
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    File URL: https://www.tcd.ie/Economics/TEP/2020/TEP0920.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    uncertainty; international capital flows; BIS Locational Banking Statistics; retrenchment; flight-to-safety;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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