Saturday, Jan. 4, 2020 8:00 AM - 10:00 AM (PDT)
- Chair: Diana Bonfim, Bank of Portugal and Catholic University of Portugal
Financial Globalization and Bank Lending: The Limits of Domestic Monetary Policy?
AbstractWe empirically analyze how bank lending reacts to monetary policy in the presence of global financial flows. Employing a unique and novel dataset in structurally identified regressions, we show that the efficiency of the bank lending channel is affected when banks can shift to international funding and thus insulate their costs of funding from domestic monetary policy. We isolate the effects of global factors from domestic monetary policy by focusing on exchange rates deviations from the prediction of interest rate parities, and find the effects even pass through to non-international banks via domestic interbank lending.
Regulatory Arbitrage and Cross-Border Syndicated Loans
AbstractThis paper investigates how international regulatory and institutional differences affect lending in the cross-border syndicated loan market. Lending provided through a foreign subsidiary is subject to subsidiary-country regulation and institutional arrangements. Multinational banks' choices between loan origination through the parent bank or through a foreign subsidiary provide information about these banks' preferences to operate in countries with varying regulations and institutions. Our results indicate that international banks originated larger loan volumes in countries with less stringent capital regulations consistent with regulatory arbitrage before the financial crisis. The results from estimating a conditional logit model of banks' choices of the country of loan origination also confirm that there was regulatory arbitrage before the financial crisis. Further, higher-quality institutions related to creditor rights and the rule of law promote loan origination volumes as well as location.
Catering through Globalization: Cross-Border Expansion and Misallocation in the Global Mutual Fund Industry
AbstractEfficient financial globalization should reward high-skilled financial institutions and punish low-skilled institutions. We show that the globalization of the mutual fund industry in the beginning of the century has exhibited the opposite pattern: low-skilled companies can benefit from globalization by catering to the demand of unsophisticated investors for foreign investment. This catering strategy attracts capital for fund companies but fails to deliver performance or diversification benefits to investors. Moreover, its associated cross-border capital flows reduce price efficiency and liquidity in the target country. Our results highlight the potential existence of a short-term behavioral component of financial globalization in distorting efficiency.
- G2 - Financial Institutions and Services
- F3 - International Finance