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August 2017: New measure of financial globalisation

Vox EU Column: Financial globalisation and market volatility

August 2017: New Vox EU Column

The global financial cycle: Closer to an anticlimax than a juggernaut

August 2017: New Vox EU Column

Financial globalisation and market volatility

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Open Call for Papers

30th Australasian Finance and Banking Conference (AFBC)

Institute of Global Finance and the School of Banking and Finance, UNSW Business School
Sydney, December 13-15, 2017  
Deadline CfP: August 18, 2017

3rd Annual Volatility Institute Conference “Derivatives and Volatility”

Volatility Institute at NYU Shanghai
Shanghai, November 17, 2017  
Keynote Speaker: Robert Engle
Deadline CfP: August 31, 2017

Arne Ryde Conference on Financial Intermediation

Arne Ryde Foundation, Department of Economics at Lund University, Knut Wicksell Centre for Financial Studies
Lund, December 1-2, 2017  
Keynote Speaker: Anthony Saunders
Deadline CfP: September 1, 2017

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European System of Central Banks' Day-Ahead Conference

Lisboa, August 20, 2017  
The European System of Central Banks (ESCB) and Banco de Portugal (BdP)


European Economic Association (EEA) and the Econometric Society
Lisbon, August 21-25 2017  
University of Lisbon
Keynotes: John Van Reenen (MIT Sloan School of Management), Amy Finkelstein (MIT), Philippe Aghion (College de France and London School of Economics)

44th European Finance Association (EFA) Annual Meeting

Mannheim, August 23-26, 2017 
European Finance Association (EFA)
Keynote speaker: Campbell R. Harvey (Duke University and NBER)

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The International Banking Library

The International Banking Library is a web-based platform for the exchange of research on cross-border banking. It provides access to data sources, academic research, both theoretical and empirical on cross-border banking, as well as information on regulatory initiatives. The International Banking Library is associated with the International Banking Research Network (IBRN), a research network of Central Banks worldwide. The International Banking Library addresses researchers, policymakers, and students of international banking and economics in search of comprehensive information on international banking issues.

At the Research Frontier     

NBER Working Paper

Authors: J. Scott Davis, Eric van Wincoop
Date: August 2017
Abstract: The authors document that the correlation between capital inflows and outflows has increased substantially over time in a sample of 128 advanced and developing countries. They provide evidence that this is a result of an increase in financial globalization (stock of external assets and liabilities). This dominates the effect of an increase in trade globalization (exports plus imports), which reduces the correlation between capital inflows and outflows. In the context of a two-country model with 14 shocks we show that the theoretical impact of financial and trade globalization on the correlation between capital inflows and outflows is consistent with the data.

NBER Working Paper

Authors: Erik Heitfield, Gary Richardson, Shirley Wang
Date: July 2017
Abstract: The initial banking crisis of the Great Depression has been the subject of debate. Some scholars believe a contagious panic spread among financial institutions. Others argue that suspensions surged because fundamentals, such as losses on loans, drove banks out of business. This paper nests those hypotheses in a single econometric framework, a Bayesian hazard rate model with spatial and network effects. New data on correspondent networks and bank locations enables us to determine which hypothesis fits the data best. The best fitting models are ones incorporating network and geographic effects. The results are consistent with the description of events by depression-era bankers, regulators, and newspapers. Contagion - both interbank and spatial - propelled a panic which healthy banks survived but which forced illiquid and insolvent banks out of operations.

SSRN Paper

Authors: Yadav Gopalan, Ankit Kalda, Asaf Manela
Date: July 2017
Abstract: Hub-and-spoke regulation, where a central regulator with legal power over firms delegates monitoring to local supervisors, can improve information collection, but can also lead to agency problems and capture. We document that following the closure of a US bank regulator's field offices, the banks they previously supervised distribute cash, increase leverage, and increase their risk of failure, more than similar banks in the same time and place. The opposite occurs for openings. Our findings suggest that field level interaction is an important part of regulation, and that distancing supervisors from banks to prevent regulatory capture can increase bank risk.

CEPR Discussion Paper

Authors: Patty Duijm, Dirk Schoenmaker
Date: July 2017
Abstract: Theory suggests that cross-border banking is beneficial as long as there is a non-perfect correlation across country-specific risks. Using a unique hand-collected dataset with cross-border loans for the 61 largest European banks, we find that cross-border banking in general decreases bank risk, and that the beneficial impact from cross-border banking increases when banks diversify more into countries with dissimilar economic and financial conditions. However, we find that banks do not fully utilize these diversification opportunities as banks mainly invest in countries that are economically more similar to their home country.

CEPR Discussion Paper

Authors: Daniel Paravisini, Schnabl Philipp, Veronica Rappoport
Date: July 2017
Abstract: We develop an empirical approach for identifying specialization in bank lending using granular data on borrower activities. We illustrate the approach by characterizing bank specialization by export market, combining bank, loan, and export data for all firms in Peru. We find that all banks specialize in at least one export market, that specialization affects a firm's choice of new lenders and how to finance exports, and that credit supply shocks disproportionately affect a firm's exports to markets where the lender specializes in. Thus, bank market-specific specialization makes credit difficult to substitute, with consequences for competition in credit markets and the transmission of credit shocks to the economy.

CEPR Discussion Paper

Authors: Yener Altunbas, Mahir Binici, Leonardo Gambacorta
Date: July 2017
Abstract: This paper investigates the effects of macroprudential policies on bank risk through a large panel of banks operating in 61 advanced and emerging market economies. There are three main findings. First, there is evidence suggesting that macroprudential tools have a significant impact on bank risk. Second, the responses to changes in macroprudential tools differ among banks, depending on their specific balance sheet characteristics. In particular, banks that are small, weakly capitalised and with a higher share of wholesale funding react more strongly to changes in macroprudential tools. Third, controlling for bank-specific characteristics, macroprudential policies are more effective in a tightening than in an easing episode.

BIS Working Paper

Authors: Robert Neil McCauley, Agustin S Benetrix, Patrick McGuire and Goetz von Peter
Date: June 2017
Abstract: This paper argues that the decline in cross-border banking since 2007 does not amount to a broad-based retreat in international lending ("financial deglobalisation"). We show that BIS international banking data organised by the nationality of ownership ("consolidated view") provide a clearer picture of international financial integration than the traditional balance-of-payments measure. On the consolidated view, what appears to be a global shrinkage of international banking is confined to European banks, which uniquely responded to credit losses after 2007 by shedding assets abroad - in particular, reducing lending - to restore capital ratios. Other banking systems' global footprint, notably those of Japanese, Canadian and even US banks, has expanded since 2007. Using a global dataset of banks' affiliates (branches and subsidiaries), we demonstrate that the who (nationality) accounts for more of the peak-to-trough shrinkage of foreign claims than does the where (locational factors). These findings suggest that the contraction in global lending can be interpreted as cyclical deleveraging of European banks' large overseas operations, rather than broad-based financial deglobalisation.