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Data and Code for "Do Sounder Banks Make Calmer Waters? The Link Between Bank Regulations and Capital Flow Waves

Principal Investigator(s): View help for Principal Investigator(s) Kristin Forbes, MIT-Sloan School of Management

Name	File Type	Size	Last Modified
Tables_SounderBanks_CalmerWaters.xlsx	application/vnd.openxmlformats-officedocument.spreadsheetml.sheet	237.1 KB	01/05/2020 01:24:PM

Project Citation:

Forbes, Kristin. Data and Code for "Do Sounder Banks Make Calmer Waters? The Link Between Bank Regulations and Capital Flow Waves. Nashville, TN: American Economic Association [publisher], 2020. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2020-02-12. https://doi.org/10.3886/E117082V2

Project Description

Summary: This paper tests if prudential and macroprudential regulations have meaningfully reduced the incidence of capital flow “waves”, i.e., of sudden stops and surges of capital flows from abroad. The results support other work documenting changes since 2008 in how global factors affect capital flows, but provide mixed evidence on how regulations have affected the incidence of sharp capital flow movements. Regulations that strengthen banks (such as higher capital-asset ratios) meaningfully reduce the incidence of surges, but tighter macroprudential regulations appear to have done little to reduce the incidence of capital flow waves—and are even correlated with an increased risk of sudden stops. This may reflect their limited use to date, or how they interact with different types of capital flows. Macroprudential regulations may have reduced the volume and volatility of bank flows, but shifted financial intermediation outside the regulated sector and thereby increased the volatility of debt and equity flows. These reforms could still provide important benefits, however, in terms of building the resilience of banks and thereby mitigating the negative effects of capital flow waves on the broader economy. Even if the waters are not much calmer, the waves should do less damage.

Scope of Project

Subject Terms: prudential regulation; macroprudential regulation; capital flows; sudden stops; surges; risk factors; global financial cycle; extreme capital flow episode

JEL Classification:
      F38 International Financial Policy: Financial Transactions Tax; Capital Controls
      F62 Economic Impacts of Globalization: Macroeconomic Impacts
      G15 International Financial Markets
      G28 Financial Institutions and Services: Government Policy and Regulation
      G38 Corporate Finance and Governance: Government Policy and Regulation

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Published Versions

V3 [2020-05-18]

V2 [2020-02-12]

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