Banking Flows and Financial Crisis : Financial Interconnectedness and Basel III Effects

This paper examines the factors that determine banking flows from advanced economies to emerging markets. In addition to the usual determinants of capital flows in terms of global push and local pull factors, it examines the role of bilateral facto...

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Bibliographic Details
Main Authors:	Ghosh, Swati R., Sugawara, Naotaka, Zalduendo, Juan
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ADVANCED COUNTRIES ADVANCED ECONOMIES ADVANCED ECONOMY AGENCY PROBLEMS AMOUNT OF CAPITAL AMOUNT OF LOANS ASSET PRICES ASYMMETRIC INFORMATION BALANCE OF PAYMENTS BALANCE SHEET BALANCE SHEETS BANK LENDING BANK OF ENGLAND BANK POLICY BANKING CRISES BANKING INSTITUTIONS BANKING SECTOR BANKING SECTOR DEVELOPMENTS BANKING SECTORS BANKING SUPERVISION BANKING SYSTEM BANKING SYSTEMS BASIS POINT BASIS POINTS BOND BOND FLOWS BOND MARKETS BONDS BORROWER BORROWING BUSINESS CYCLE CAPITAL ACCOUNT CAPITAL ADEQUACY CAPITAL ADEQUACY RATIOS CAPITAL BASE CAPITAL FLOW CAPITAL FLOWS CAPITAL INFLOWS CAPITAL MARKETS CAPITAL RATIO CAPITAL RATIOS CAPITAL REQUIREMENT CAPITAL REQUIREMENTS CAPITAL STANDARDS CAPITAL STRUCTURE CAPITALIZATION COLLATERAL CORPORATE GOVERNANCE COST OF CAPITAL COST OF EQUITY COUNTRY RISK CREDIT AVAILABILITY CREDIT GROWTH CREDIT MARKET CREDIT MARKETS CREDITOR CRISIS COUNTRIES CRISIS COUNTRY CROSS-BORDER FLOWS CURRENCY CURRENCY CRISES CURRENT ACCOUNT BALANCE CURRENT ACCOUNT DEFICITS DEBT DEBT FLOWS DEBT-EQUITY DEBT-EQUITY SWAPS DEBTOR DECLINE IN INVESTMENT DERIVATIVES DEVELOPING COUNTRIES DIVIDEND DIVIDEND PAYMENTS DOMESTIC BANK DOMESTIC CAPITAL DUMMY VARIABLE DUMMY VARIABLES DURABLE EMERGING MARKET EMERGING MARKET ECONOMIES EMERGING MARKETS EQUITY CAPITAL EQUITY INVESTMENT EQUITY INVESTMENTS EXCHANGE RATE MOVEMENTS EXCHANGE RATE REGIME EXCHANGE RATES EXPORT GROWTH EXPOSURE EXPOSURES FACTORS OF PRODUCTION FINANCIAL ASSET FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL DEVELOPMENT FINANCIAL FLOWS FINANCIAL INFRASTRUCTURE FINANCIAL INSTITUTIONS FINANCIAL INTEGRATION FINANCIAL MARKETS FINANCIAL OPENNESS FINANCIAL STABILITY FINANCIAL SYSTEM FINANCIAL TRANSACTIONS FLEXIBLE EXCHANGE RATE FLOW OF INFORMATION FOREIGN CAPITAL FOREIGN DIRECT INVESTMENT FOREIGN EXCHANGE FOREIGN EXCHANGE RESERVE FOREIGN INTEREST FOREIGN MARKETS GLOBAL BANKING GLOBAL CAPITAL GLOBAL ECONOMY GLOBAL FINANCIAL MARKETS GLOBAL RISKS GOVERNMENT POLICIES HOLDING HOME COUNTRY HOME MARKET HOST COUNTRIES HOST COUNTRY INCOME INFLATION INTEREST DIFFERENTIAL INTEREST DIFFERENTIALS INTEREST RATE INTEREST RATE DIFFERENTIAL INTEREST RATE DIFFERENTIALS INTEREST RATES INTERNATIONAL BANK INTERNATIONAL BANKING INTERNATIONAL BANKS INTERNATIONAL CAPITAL INTERNATIONAL CAPITAL MARKET INTERNATIONAL CREDIT INTERNATIONAL DEVELOPMENT INTERNATIONAL ECONOMICS INTERNATIONAL FINANCE INTERNATIONAL FINANCIAL STATISTICS INTERNATIONAL PORTFOLIO INVESTING INVESTMENT FLOWS INVESTMENT RATES ISSUANCES LENDER LENDERS LENDING DECISIONS LENDING SPREAD LENDING SPREADS LIQUIDITY LIQUIDITY RISK LOAN LOAN PORTFOLIOS LOCAL CURRENCY LONG-TERM EXTERNAL DEBT MACROECONOMIC CONDITIONS MACROECONOMIC POLICIES MACROECONOMIC VARIABLES MACROECONOMICS MARKET INTEREST RATE MARKET PARTICIPANTS MARKET VOLATILITY MIDDLE-INCOME COUNTRIES MINIMUM CAPITAL REQUIREMENTS MONETARY AUTHORITIES MONEY MARKET NATIONAL SAVINGS OFF BALANCE SHEET OPERATING EFFICIENCY OUTPUT POLITICAL STABILITY PORTFOLIO PORTFOLIO FLOWS PORTFOLIO INVESTMENT PORTFOLIO INVESTMENTS POSITIVE COEFFICIENT PRIVATE CAPITAL PRIVATE CAPITAL FLOWS PRIVATE CAPITAL INFLOWS PROBABILITY OF DEFAULT PRODUCTION STRUCTURE PROFITABILITY PRUDENTIAL REGULATION PRUDENTIAL REGULATIONS PUSH FACTOR PUSH FACTORS RATE OF RETURN REAL EXCHANGE RATE REGIONAL DUMMIES REGIONAL DUMMY REGULATORY CAPITAL REGULATORY FRAMEWORK REPAYMENTS RETAINED EARNINGS RETURNS RISK AVERSION RISK FACTOR RISK MANAGEMENT RISKY ASSETS SAVINGS RATES SOVEREIGN RISK SUBSIDIARIES TIER 1 CAPITAL TIER 2 CAPITAL TRADE FLOWS TRADING TRANSACTION TRANSACTION COSTS TRANSPARENCY TRANSPORT TREASURIES VALUATION
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20111213102006 http://hdl.handle.net/10986/3684

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Summary:	This paper examines the factors that determine banking flows from advanced economies to emerging markets. In addition to the usual determinants of capital flows in terms of global push and local pull factors, it examines the role of bilateral factors, such as growth differentials and economic size, as well as contagion factors and measures of the depth in financial interconnectedness between lenders and borrowers. The analysis finds profound differences across regions. In particular, in spite of the severe impact of the global financial crisis, banking flows in emerging Europe stand out as a more stable region than is the case in other developing regions. Assuming that the determinants of banking flows remain unchanged in the presence of structural changes, the authors use these results to explore the short-term implications of Basel III capital regulations on banking flows to emerging markets.

Banking Flows and Financial Crisis : Financial Interconnectedness and Basel III Effects

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