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arXiv · 2310.11552

Global Factors in Non-core Bank Funding and Exchange Rate Flexibility

Luís A. V. Catão·Jan Ditzen·Daniel Marcel te Kaat
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Abstract

We show that fluctuations in the ratio of non-core to core funding in the banking systems of advanced economies are largely driven by three global factors of both real and financial natures, with country-specific factors playing only a minor role. Exchange rate flexibility helps insulate the non-core to core ratio from such global factors. This insulation is stronger in periods away from global crises. Tighter prudential regulations appear to have a complementary effect to exchange rate insulation.

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Luís A. V. Catão, Jan Ditzen, Daniel Marcel te Kaat. 2023-10-17. Global Factors in Non-core Bank Funding and Exchange Rate Flexibility. https://arxiv.org/abs/2310.11552

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