Financial stress in lender countries and capital outflows from emerging market economies
- Authors
- Shim, Ilhyock; Shin, Kwanho
- Issue Date
- 5월-2021
- Publisher
- ELSEVIER SCI LTD
- Keywords
- Capital outflows; Cross-border claims; Emerging market economies; Financial stress
- Citation
- JOURNAL OF INTERNATIONAL MONEY AND FINANCE, v.113
- Indexed
- SSCI
SCOPUS
- Journal Title
- JOURNAL OF INTERNATIONAL MONEY AND FINANCE
- Volume
- 113
- URI
- https://scholar.korea.ac.kr/handle/2021.sw.korea/128178
- DOI
- 10.1016/j.jimonfin.2021.102356
- ISSN
- 0261-5606
- Abstract
- We investigate if financial stress in countries where international banks are headquartered is a major driver of the withdrawal of these banks' credit to emerging market economies (EMEs). We find that when financial stress, measured by sovereign or bank CDS spreads or corporate bond spreads, increases, international banks decrease their lending to EMEs, which acts as a major driver of capital outflows from EMEs. In particular, financial stress in lender countries is a more important driver than the local financial conditions and macroeconomic fundamentals of EMEs. Such results hold for both the countries that experienced crises and those that did not, during the Global Financial Crisis (GFC). Such results also generally hold even after the GFC period, but to a lesser extent. Our findings suggest that it is desirable for EME policymakers to promote diversification of lender countries. (c) 2021 Elsevier Ltd. All rights reserved.
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Collections - College of Political Science & Economics > Department of Economics > 1. Journal Articles
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