Global Factors in Non-core Bank Funding and Exchange Rate Flexibility
General Economics
2025-04-04 v6 Economics
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.
Keywords
Cite
@article{arxiv.2310.11552,
title = {Global Factors in Non-core Bank Funding and Exchange Rate Flexibility},
author = {Luís A. V. Catão and Jan Ditzen and Daniel Marcel te Kaat},
journal= {arXiv preprint arXiv:2310.11552},
year = {2025}
}