Cross-border Banking and the Circumvention of Macroprudential and Capital Control Measures / Eugenio Cerutti, Haonan Zhou.

Format:

Book

Government document

Author/Creator:

Cerutti, Eugenio.

Contributor:

Zhou, Haonan.

International Monetary Fund, issuing body.

Series:

IMF Working Papers; Working Paper ; No. 2018/217

IMF Working Papers

Language:

English

Subjects (All):

International finance.

Capital movements.

Monetary policy.

Financial risk management.

Physical Description:

1 online resource (47 pages)

Edition:

1st ed.

Place of Publication:

Washington, D.C. : International Monetary Fund, 2018.

Summary:

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.

Contents:

Cover

Contents

I. Introduction

II. Empirical Strategy

III. Do MPM and CCM generate international spillovers? Evidence from two-stage re-gressions

IV. Individual MPM and CCM: Uncovering heterogeneity and the potential presence of circumvention

V. Do policy interactions mitigate or augment the spillovers?

VI. Some further robustness tests

VII. Conclusions

References

Figures

Figure 1: Global usage of macroprudential instruments and capital controls

Figure 2: Model prediction and counterfactual banking flows: Overall macroprudential policy

Figure 3: Model prediction and counterfactual banking flows: Overall capital flow re-strictions

Figure 4: Interaction between macroprudential policy, capital control and direct cross-border banking

Tables

Table 1: Variable Definitions

Table 2: Summary Statistics

Table 3: Macroprudential policy, capital control and cross-border lending - first stage overall estimates

Table 4: Macroprudential policy, capital control and cross-border lending - second stage overall estimates

Table 5: Macroprudential policy and cross-border banking - second-stage specific esti-mates

Table 6: Borrowers' macroprudential policy and cross-border banking: Interaction with credit cycles

Table 7: Macroprudential policy and cross-border banking - second-stage specific esti-mates, AE/EMDE breakdown

Table 8: Capital control and cross-border banking - second-stage specific estimates

Table 9: Capital control measures and cross-border banking - second-stage specific es- timates, AE/EM breakdown

Table 10: MPM, CCM and cross-border banking: robustness to right censoring

Table 11: MPM, CCM and cross-border banking: 2011-2015 sample estimates

Appendix A.1. Micro-found the empirical framework and counterfactual analysis.

Appendix A.2. Additional Tables and Counterfactual Figures.

Notes:

Includes bibliographical references.

Description based on publisher supplied metadata and other sources.

Description based on print record.

ISBN:

9781484379189

1484379187

9781484379219

1484379217

OCLC:

1059401984