International Bank Portfolios: Short- and Long-Run Responses to Macroeconomic Conditions
Year: 2010
Type: article
Abstract: International bank portfolios constitute a large component of international country portfolios. Yet, banks' response to international macroeconomic conditions remains largely unexplored. We use a novel dataset on banks' international portfolios to answer three questions. First, what are the long-run determinants of banks' international portfolios? Second, how do banks' international portfolios adjust to short-run macroeconomic developments? Third, does the speed of adjustment change with the degree of financial integration? We find that, in the long-run, market size has a positive impact on foreign assets and liabilities. An increase in the interest differential between the home and the foreign economy lowers foreign assets and increases foreign liabilities. Foreign trade has a positive impact on international bank portfolios, which is independent from the effect of other macroeconomic variables. Short-run dynamics show heterogeneity across countries, but these dynamics can partly be explained with gravity-type variables.
Authors: Sven Blank, Claudia M. Buch
Institutions: University of Tübingen, Bank for International Settlements
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
Funder: Division of Chemistry
OpenAlex ID: W1983751727