Economics of Digital Globalization and Information Data Flows

Economics of Digital Globalization and Information Data Flows

 

Please see this link below for changes in global data flows between 2005 and 2014.

Source: McKinsey & Company.

McKinsey Global Flows of Data

 

digitalglobal

 

 

People and Businesses are using internet and other data and communications technologies in variety of ways.  Some are listed below.

  • e-commerce
  • Social networking
  • Digital media
  • Blogging
  • Online eduction
  • Online entertainment
  • Business Communications
  • Online Capital
  • Online Organizing
  • Online Markets (Amazon, Ebay, Alibaba)

 

Governments and Trade organizations are catching up to these trends. Several research reports have been published recently.  Trade agreements are being negotiated which include means to reduce barriers to digital trade.

 

From DIGITAL GLOBALIZATION: THE NEW ERA OF GLOBAL FLOWS

Conventional wisdom says that globalization has stalled. But although the global goods trade has flattened and cross-border capital flows have declined sharply since 2008, globalization is not heading into reverse. Rather, it is entering a new phase defined by soaring flows of data and information.

Remarkably, digital flows—which were practically nonexistent just 15 years ago—now exert a larger impact on GDP growth than the centuries-old trade in goods, according to a new McKinsey Global Institute (MGI) report, Digital globalization: The new era of global flows. And although this shift makes it possible for companies to reach international markets with less capital-intensive business models, it poses new risks and policy challenges as well.

The world is more connected than ever, but the nature of its connections has changed in a fundamental way. The amount of cross-border bandwidth that is used has grown 45 times larger since 2005. It is projected to increase by an additional nine times over the next five years as flows of information, searches, communication, video, transactions, and intracompany traffic continue to surge. In addition to transmitting valuable streams of information and ideas in their own right, data flows enable the movement of goods, services, finance, and people. Virtually every type of cross-border transaction now has a digital component.

Trade was once largely confined to advanced economies and their large multinational companies. Today, a more digital form of globalization has opened the door to developing countries, to small companies and start-ups, and to billions of individuals. Tens of millions of small and midsize enterprises worldwide have turned themselves into exporters by joining e-commerce marketplaces such as Alibaba, Amazon, eBay, Flipkart, and Rakuten. Approximately 12 percent of the global goods trade is conducted via international e-commerce. Even the smallest enterprises can be born global: 86 percent of tech-based start-ups surveyed by MGI report some type of cross-border activity. Today, even the smallest firms can compete with the largest multinationals.

Individuals are using global digital platforms to learn, find work, showcase their talent, and build personal networks. Some 900 million people have international connections on social media, and 360 million take part in cross-border e-commerce. Digital platforms for both traditional employment and freelance assignments are beginning to create a more global labor market.

In this increasingly digital era of globalization, large companies can manage their international operations in a leaner, more efficient ways. Using digital platforms and tools, they can sell in fast-growing markets while keeping virtual teams connected in real time. This is a moment for companies to rethink their organizational structures, products, assets, and competitors.

Global flows of all types support growth by raising productivity, and data flows are amplifying this effect by broadening participation and creating more efficient markets. MGI’s analysis finds that over a decade, all types of flows acting together have raised world GDP by 10.1 percent over what would have resulted in a world without any cross-border flows. This value amounted to some $7.8 trillion in 2014 alone, and data flows account for $2.8 trillion of this impact. Both inflows and outflows matter for growth, as they expose economies to ideas, research, technologies, talent, and best practices from around the world.

Although there is substantial value at stake, not all countries are making the most of this potential. The latest MGI Connectedness Index—which ranks 139 countries on inflows and outflows of goods, services, finance, people, and data—finds large gaps between a handful of leading countries and the rest of the world. Singapore tops the latest rankings, followed by the Netherlands, the United States, and Germany. China has grown more connected, reaching number seven, but advanced economies in general remain more connected than developing countries. In fact, each type of flow is concentrated among a small set of highly connected countries.

Lagging countries are closing the gaps with the leaders at a very slow pace, and their limited participation has had a real cost to the world economy. If the rest of the world had increased its participation in global flows at the same rate as the top quartile over the past decade, world GDP would be $10 trillion, or 13 percent, higher today. For countries that have been slow to participate, the opportunities for catch-up growth are too substantial to ignore.

 

 

From Why globalization isn’t it in retreat, it’s gone digital

A hand is silhouetted in front of a computer screen in this picture illustration taken in Berlin May 21, 2013. The Financial Times’ website and Twitter feeds were hacked May 17, 2013, renewing questions about whether the popular social media service has done enough to tighten security as cyber-attacks on the news media intensify. The attack is the latest in which hackers commandeered the Twitter account of a prominent news organization to push their agenda. Twitter’s 200 million users worldwide send out more than 400 million tweets a day, making it a potent distributor of news.

Around the world, countries are rethinking the terms of engagement in global trade. This is not all bad; in fact, acknowledgement of globalization’s disruptive effects on millions of advanced-economy workers is long overdue. But new trade policies must be based on a clear-eyed understanding of how globalization is evolving, not on a backward-looking vision based on the last 30 years.

Globalization has done the world a lot of good. Research from the McKinsey Global Institute shows that, thanks to global flows of goods, services, finance, data, and people, world GDP is more than 10% higher – some $7.8 trillion in 2014 alone – than it would have been had economies remained closed.

More interconnected countries capture the largest share of this added value. For example, the United States, which ranks third among 195 countries on MGI’s Connectedness Index, has done rather well. Emerging-market economies have also reaped major gains, using export-oriented industrialization as a springboard for rapid growth.

Yet, even as globalization has narrowed inequality among countries, it has aggravated income inequality within them. From 1998 to 2008, the middle class in advanced economies experienced no income growth, while incomes soared by nearly 70% for those at the top of the global income distribution. Top earners in the US, accounting for half of the global top 1%, reaped a significant share of globalization’s benefits.

To be sure, this isn’t all, or even mostly, a result of globalization. The main culprit is technological change that automates routine manual and cognitive tasks, while increasing demand (and wages) for highly skilled workers. But import competition and labor arbitrage from emerging economies have also played a role. Perhaps more important, they have proved more salient targets of voters’ fear and resentment.

Indeed, in the industries and regions hit hardest by import competition, years of simmering discontent have now boiled over, fueling support for populists promising to roll back globalization. But, as the advanced economies reformulate trade policy, it is critical that they understand that globalization was already undergoing a major structural transformation.

Since the global financial crisis, cross-border capital flows have plummeted, with banks pulling back in response to new regulation. From 1990 to 2007, global trade grew twice as fast as global GDP; since 2010, GDP growth has outpaced that of trade.

Both cyclical and secular forces are behind the trade slowdown. Investment has been anemic for years. China’s growth has slowed – a secular trend that is unlikely to be reversed. And the expansion of global supply chains seems to have reached the frontier of efficiency. In short, slower global trade is likely to be the new normal.

None of this is to say that globalization is in retreat. Rather, it is becoming a more digital phenomenon. Just 15 years ago, cross-border digital flows were almost non-existent; today, they have a larger impact on global economic growth than traditional flows of traded goods.

The volume of cross-border data flows has soared 45-fold since 2005, and is expected to grow another nine-fold over the next five years. Users worldwide can stream Beyoncé’s latest single immediately upon its release. A manufacturer in South Carolina can use the e-commerce platform Alibaba to buy components from a Chinese supplier. A young girl in Kenya can learn math through Khan Academy. Eighty percent of students taking Coursera’s online courses live outside the US.

This new form of digital globalization is more knowledge-intensive than capital- or labor-intensive. It requires broadband connections, rather than shipping lanes. It reduces barriers to entry, strengthens competition, and changes the rules governing how business is done.

Consider export activities, which once seemed out of reach for small businesses lacking the resources to scout out international prospects or navigate cross-border paperwork. Now, digital platforms like Alibaba and Amazon enable even small-scale entrepreneurs to connect directly with customers and suppliers around the world, transforming themselves into “micro multinationals.” Facebook estimates that 50 million small businesses are on its platform, up from 25 million in 2013; 30% of these companies’ Facebook fans, on average, are from other countries.

While digital technologies open the door for small companies and individuals to participate in the global economy, there is no guarantee that sufficient numbers will walk through it. That will require policies that help them take advantage of new global market opportunities.

The US has pulled out of the Trans-Pacific Partnership (TPP) deal, but many of the issues it addressed still require global rules. Data localization requirements and protectionism are on the rise, and data privacy and cyber-security are pressing concerns. In the absence of the TPP, it will be critical to find some other vehicle for establishing new principles for digital trade in the twenty-first century, with a greater emphasis on intellectual property protection, cross-border data flows, and trade in services.

At the same time, advanced economies must help workers acquire the skills needed to fill high-quality jobs in the digital economy. Lifelong learning cannot just be a slogan; it must become a reality. Mid-career retraining must be made available not only to those who have lost their jobs to foreign competition, but also to those facing disruption from the continuing march of automation. Training programs should be able to impart new skills in a matter of months, not years, and they should be complemented by programs that support workers’ incomes during retraining, and that help them relocate for more productive work.

Most of the advanced economies, including the US, have not adequately responded to the needs of the communities and individuals left behind by globalization. Addressing these needs is now of paramount importance. Effective responses will require policies that help people adapt to the present and take advantage of future opportunities in the next phase of digital globalization.

 

From The ascendancy of international data flows

We compiled data for more than 150 countries for 20 years regarding six types of cross-border flows: physical flows of goods and services, FDI flows, financial flows, labour migration flows, and data flows measured in bits. As flows are most likely correlated to each other, we first resorted to a principal component analysis of flows and found that the largest factor accounted for up to 60% of the variance among flows, with all flows being positively correlated to the factor. Among the factors, this primary factor was also the only one to be statistically (and, as expected, positively) associated with a country’s economic growth.

Estimating a pooled cross-section, time series co-integration model of country GDP growth, we find that, together, global flows of goods, services, finance, people, and data have raised world GDP by at least 10% in the past decade, adding US$8 trillion of GDP by 2015. More crucially, and in part driven by the material growth in cross-border data bits internationally, the value of data flows has nearly matched the value of global trade in physical goods. By 2014, cross-border data flows accounted for $2.3 trillion of this value, or roughly 3.5% of total world GDP.

This estimate is only a first benchmark which will require further verification. But it underscores the importance of global data flows for economies at large. It also highlights new elements of consideration for economists, for policymakers, and for business. Given the significant contribution to GDP, governments must address pending issues such as free flows of data, cybersecurity, and privacy. They must also harness flows better through international standardisation of single payment systems, standardisation of internet of things protocols, coordination of tax issues, and integrated logistics. On the business side, the world’s biggest digital platforms – from e-commerce marketplaces to social media network – have become global in a matter of a few years, but though their concentration may be a concern, they have also amassed hundreds of millions of companies that can benefit from improved export opportunities and achieve major productivity gains.

Furthermore, the international flow of information facilitated by these digital technologies is a powerful driver of new performance for global firms, for example in optimising distributed R&D and innovation. Ultimately, everyone will need to go with the flow.

 

Key Terms:

 

  • GATS (General Agreement on Trade in Services)
  • ICT (information and communications technology)
  • IPR (intellectual property rights)
  • ITA (International Technology Agreement)
  • NTIA (National Telecommunications and Information Administration)
  • OECD (Organization for Economic Co-operation and Development)
  • TPP (Trans-Pacific Partnership)
  • TTIP (Transatlantic Trade and Investment Partnership)
  • TiSA (Trade in Services Agreement)
  • USITC (United States International Trade Commission)
  • USTR (United States Trade Representative)
  • WTO (World Trade Organization)
  • Digital Trade

 

 

Key Sources of Research:

 

DIGITAL GLOBALIZATION: THE NEW ERA OF GLOBAL FLOWS

2016

MGI

http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/digital-globalization-the-new-era-of-global-flows

 

 

Global flows in a digital age

How trade, finance, people, and data connect the world economy

By James Manyika, Jacques Bughin, Susan Lund, Olivia Nottebohm, David Poulter, Sebastian Jauch, and Sree Ramaswamy

McKinsey 2014

http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/global-flows-in-a-digital-age

 

 

Harnessing the power of shifting global flows

By Jacques Bughin, Susan Lund, and James Manyika

McKinsey

2015

http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/harnessing-the-power-of-shifting-global-flows

 

 

Internet matters: The Net’s sweeping impact on growth, jobs, and prosperity

By Matthieu Pélissié du Rausas, James Manyika, Eric Hazan, Jacques Bughin, Michael Chui, Rémi Said

McKinsey 2011

http://www.mckinsey.com/industries/high-tech/our-insights/internet-matters

 

 

Online and Upcoming:  Internet’s Impact on India

McKinsey 2012

http://lateralpraxis.com/download/Internets%20impact%20on%20India.pdf

 

 

Online and upcoming: The Internet’s impact on aspiring countries

January 2012

Olivia Nottebohm James Manyika Jacques Bughin Michael Chui Abdur-Rahim Syed

http://www.innovacion.cl/wp-content/uploads/2012/05/Internet.pdf

 

 

The Importance of The Internet and Transatlantic data flows for U.S. and EU Trade and Investment

Joshua p. meltzer

2014

Brookings

https://www.brookings.edu/wp-content/uploads/2016/06/internet-transatlantic-data-flows-version-2.pdf

 

 

ASEF OUTLOOK REPORT 2016/2017

 

Asia Europe Foundation

http://www.asef.org/images/docs/1.%20Measuring%20Connectivity.pdf

http://www.asef.org/images/docs/ASEF%20Outlook%20Report%202016-2017%20Vol2.pdf

http://asef.org/images/docs/ASEF%20Outlook%20Report%202016-2017%20Vol1.pdf

 

 

Mega-trends 2015 Making sense of a world in motion

EY

http://www.ey.com/Publication/vwLUAssets/ey-megatrends-report-2015/$FILE/ey-megatrends-report-2015.pdf

http://www.ey.com/Publication/vwLUAssets/ey-making-sense-of-a-world-in-motion/$FILE/ey-making-sense-of-a-world-in-motion.pdf

 

 

Cross-Border Data Flows, Digital Innovation, and Economic Growth

Robert Pepper John Garrity Connie LaSalle

2016

WEF

 

http://www3.weforum.org/docs/GITR2016/WEF_GITR_Chapter1.2_2016.pdf

http://www.aciem.org/home/images/Prensa/Newsletter/PDF_Notas_Prensa_Int_Gen_07_Jul_2016.pdf

 

 

Business Without Borders: The Importance of Cross-Border Data Transfers to Global Prosperity

US Chamber of Commerce

2014

https://www.hunton.com/files/Publication/d28675b8-5d7b-4f43-a1f1-dda852294ba6/Presentation/PublicationAttachment/2d735aec-6ce8-48c3-b736-e2e4baf8dbf5/Business_without_Borders.pdf

https://www.uschamber.com/sites/default/files/021384_BusinessWOBorders_final.pdf

 

 

The Digital Revolution in Banking

Gail Kelly

Group of Thirty

 

http://www.centerforfinancialstability.org/research/OP89.pdf

 

 

Digital Trade and U.S. Trade Policy

Rachel F. Fefer

Shayerah Ilias Akhtar

Wayne M. Morrison

US Congress Research

January 13, 2017

https://fas.org/sgp/crs/misc/R44565.pdf

 

 

Measuring the Value of Cross-Border Data Flows

US Deptt of Commerce

2016

https://www.ntia.doc.gov/files/ntia/publications/measuring_cross_border_data_flows.pdf

 

Transatlantic Digital Economy and Data Protection: State-of-Play and Future Implications for the EU’s External Policies

EU Parliament

 

http://www.europarl.europa.eu/RegData/etudes/STUD/2016/535006/EXPO_STU(2016)535006_EN.pdf

 

 

Why globalization isn’t it in retreat, it’s gone digital

WEF

https://www.weforum.org/agenda/2017/02/why-globalization-isnt-it-in-retreat-its-gone-digital

 

 

The ascendancy of international data flows

Jacques Bughin, Susan Lund

09 January 2017

http://voxeu.org/article/ascendancy-international-data-flows

 

 

DIGITAL TRADE AND THE TPP HOW ASIA-PACIFIC BENEFITS

 

https://static1.squarespace.com/static/5393d501e4b0643446abd228/t/57fc86501b631ba46c243265/1476167250211/digital+trade+and+the+TPP_v2_DIGITAL.pdf

 

 

The Digital Trade Imbalance and Its Implications for Internet Governance

Susan Ariel Aaronson

2016

 

https://www.cigionline.org/sites/default/files/gcig_no25_web_0.pdf

https://www2.gwu.edu/~iiep/assets/docs/papers/2016WP/AaronsonIIEPWP2016-7.pdf

 

 

Solutions to the digital trade imbalance

Susan Ariel Aaronson

07 March 2016

http://voxeu.org/article/solutions-digital-trade-imbalance

http://www.worldcommercereview.com/publications/article_pdf/1049

 

 

Digital Trade in the U.S. and Global Economies, Part 2

USITC

2014

 

https://www.usitc.gov/publications/332/pub4485.pdf

 

 

Digital Trade in the U.S. and Global Economies, Part 1

USITC

2013

https://www.usitc.gov/publications/332/pub4415.pdf

 

 

Enter the Data Economy : EU Policies for a Thriving Data Ecosystem

European Commission

2017

 

https://ec.europa.eu/epsc/sites/epsc/files/strategic_note_issue_21.pdf

 

 

Data, Trade and Growth

BY DR. MICHAEL MANDEL

2014

http://www.progressivepolicy.org/wp-content/uploads/2014/04/2014.04-Mandel_Data-Trade-and-Growth.pdf

 

 

Bridging the Data Gap How Digital Innovation Can Drive Growth and Create Jobs

By Paul Hofheinz and Michael Mandel

2014

 

http://www.progressivepolicy.org/wp-content/uploads/2014/04/LISBON_COUNCIL_PPI_Bridging_the_Data_Gap2.pdf

 

 

Measuring the Economic Value of Cross-Border Data Flows

April 22, 2016

Jessica R. Nicholson

UNCTAD

 

http://unctad.org/meetings/en/Presentation/dtl_eweek2016_JNicholson_en.pdf

 

 

Trends in Digitally-Enabled Trade in Services

by Maria Borga and Jennifer Koncz-Bruner

 

https://www.bea.gov/international/pdf/trends_in_digitally_enabled_services.pdf

 

 

Digital Economy and Cross-Border Trade: The Value of Digitally-Deliverable Services

Jessica R. Nicholson and Ryan Noonan

2014

U.S. Department of Commerce / Economics and Statistics Administration

 

http://www.esa.doc.gov/sites/default/files/digitaleconomyandtrade2014-1-27final.pdf

 

 

World Development Report 2016: Digital Dividends

World Bank 2016

http://www.worldbank.org/en/publication/wdr2016

 

 

Cross-Border Data Flows Enable Growth in All Industries

BY DANIEL CASTRO AND ALAN MCQUINN

| FEBRUARY 2015

 

http://www2.itif.org/2015-cross-border-data-flows.pdf?_ga=1.64526831.1959464330.1454009762

 

 

Addressing Barriers to Digital Trade

Usman Ahmed and Grant Aldonas

WEF

E15 Initiative

December 2015

http://e15initiative.org/publications/addressing-barriers-to-digital-trade/

 

 

The Internet Economy in the G-20

The $4.2 Trillion Growth Opportunity

 

https://www.bcg.com/documents/file100409.pdf

Development of Global Trade and Production Accounts: UN SEIGA Initiative

Development of Global Trade and Production Accounts: UN SEIGA Initiative

 

UNSD is developing a handbook on

System of Extended International and Global Accounts (SEIGA)

Statistics to guide policy making has lagged behind dramatic changes in interconnectedness among nations.

  • Financial Globalization
  • Trade Globalization
  • Climate and Environmental Globalization
  • Economic Integration
  • Digital Globalization – Data and Information Flows
  • People Movements Globalization

Efforts are underway to correct data and statistics measurement and collection.

  • OECD/WTO Trade in Value Added
  • EU/EUROSTAT Multi Country Input-Output Tables
  • UN SEEA
  • UN SEIGA
  • UNECE Global Production
  • EUROSTAT FIGARO
  • EUROSTAT IGA

 

From 2014 International Conference on Measurement of Trade and Economic Globalization

Measurement of International Trade and Economic Globalization

Concept Note

In recent years, concerns were raised about the shortcomings of the existing official trade statistics for the purpose of reflecting bilateral economic relations. The high level of import content in exports makes gross bilateral trade statistics unsuitable for bilateral trade negotiations. Trade analysis requires new measures which better reflect the level of interdependencies among countries engaged in global value chains (GVCs). In order to understand the true nature of trade relationships, we need to know what each country along a global value chain contributes to the value of a final product. We also need to know how that contribution is linked to those of other suppliers in other countries coming before and after along the chain, and how much employment and income is generated through this value addition.

The statistical community responded to these concerns through a number of initiatives, such as the UN/Eurostat/WTO Global Forum on Trade Statistics in 2011, the OECD-WTO initiative on Trade in Value-Added launched in 2012, and the 2013 Eurostat report on Global Value Chains. An official response was delivered by bringing the measurement of international trade and economic globalization to the agenda of the UN Statistical Commission in 20131 and again in 20142. The corresponding decisions of the Commission stress the need for a measurement framework and a mechanism for coordination. Specifically, in Decision 44/1063 of its session in 2013, the Commission recognized the need for an overarching measurement framework for international trade and economic globalization, taking into account the existing frameworks and guidelines of the System of National Accounts, Balance of Payments, and the Guidelines on Integrated Economic Statistics, as well as the research and studies done by Eurostat, the OECD, the IMF and various working groups. The Commission also recognized the need for an appropriate mechanism for coordination of the work in this field, ensuring that the functions of the existing expert groups, working groups and task forces are accounted for at the international and regional levels. In the same decision, the Commission agreed to the creation of a “friends of the chair” (FOC) group tasked with preparing a concept paper on the scope and content of the framework, and on the appropriate mechanism for coordination of the work in this area.

The global economy is increasingly structured around GVCs that account for a rising share of international trade, global GDP and employment. GVCs link firms, workers and consumers around the world and often provide a stepping stone for firms and workers in developing countries to integrate into the global economy. A GVC describes the full range of activities that firms and workers perform to bring a product from its conception to end use. This includes activities such as design, production, marketing, distribution and support to the final consumer. The activities that comprise a value chain can be contained within a single firm or divided among different firms. In the context of globalization, the activities that constitute a value chain have generally been carried out in inter-firm networks on a global scale. The dependency structures of the firms in the GVC networks are of crucial importance in order to measure where income, knowledge and employment are generated, and to understand potential risk and vulnerabilities in case of a future financial crisis. Within this changed economic landscape, more complex measures of trade and production are necessary both on micro-and macro-economic level.

In other words, national economies relate to one another in a number of ways be it through trade in goods, trade in services, tourism, foreign direct investment, establishment of foreign affiliates, transfer of knowledge, creation of jobs, redistribution of income, migrant workers, emissions of CO2 or in other ways. A comprehensive way of charting those interdependencies is through a global Supply and Use table (SUT), in which countries connect through imports and exports of goods and services into and out of specific industries. Ideally, the global SUT contains for each international flow an export of a product from an industry of one country into an industry (or into final consumption) of another country, as the corresponding and matching import. In principle, only one global SUT should exist to be used by all national and international agencies for the analysis of trade and globalization. Besides the implicitly mentioned matching of bilateral trade flows (both for goods and services), further refinement may be necessary regarding the use of inputs by type of enterprise for either the domestic or the international market, including the special cases of multi-national enterprises and their foreign affiliates, goods for processing (manufacturing services) and re-exports. Further details on such global SUT were described in a recent paper of the OECD.

Compiling a global SUT requires a very close alignment and harmonization of national SUTs, price statistics and trade statistics. To achieve this in the short term, some practical decisions need to be taken and agreed upon internationally for the creation of a symmetrical and fully balanced bilateral trade matrix at the global level, which would have buy-in, cooperation and endorsement of all concerned countries. This matrix would be built strictly for the purpose of compiling an internationally recognized and accepted SUT. In the longer term, the existing recommendations for international trade statistics would need to be reviewed with the purpose of making them more symmetrical in terms of the reporting of exports and imports, and thus more suitable for the compilation of a global SUT.

A System of International Accounts.

The implications of building a global SUT [for the purpose of deriving, for instance, indicators for Trade in Value Added or Trade in Jobs] are farther reaching than just addressing asymmetries in trade and heterogeneity in firms. The underlying concepts and definitions as basis for measurement of these international statistics would need to be reviewed as well. In terms of the System of National Accounts, the Rest of the World Account would need to be more explicitly defined, especially since a global SUT implies a perfect alignment of international flows, and some international recommendations regarding heterogeneity of firms (where economically relevant). In the longer term, this set of new concepts and definitions could form a System of International Accounts, as the measurement framework for international trade and economic globalization.

 

From The relevance of multi-country input-output tables in measuring emissions trade balance of countries: the case of Spain

Background and statistical context

The latest meeting of the Group of Experts on National Accounts of the United Nations Economic Commission for Europe (UNECE, 7-9 July 2015), was devoted to data collection and compilation methods in respect to global production activities. It was jointly organized with Eurostat and the Organization for Economic Co-operation and Development (OECD). The meeting was attended by representatives from more than thirty countries worldwide and representatives from the European Commission (EC), International Monetary Fund (IMF), OECD, the United Nations Conference on Trade and Development (UNCTAD), United Nations Statistics Division (UNSD) and World Trade Organization (WTO), among others.

According to the experts at this UNECE meeting, in order to measure global production and global value chains it is no longer sufficient to look only at what a firm does, but to also to consider how the firm does its activities and with whom. For instance, linking business statistics and trade statistics on a micro level should provide new dimensions to the data as long as new balancing challenges at the macro level data (e.g. national accounts). Indeed, statisticians have not always been able to keep up to date with business practices and must find ways to be forward looking and provide the information that meets future policy needs. Traditional measures of trade in goods and services have to be progressively supplemented with information on income and financial flows. Foreign direct investment statistics (FDI) should be further developed and complemented with foreign affiliate statistics (FATS) in order to improve their clarity, usefulness and coverage, and to provide better insights into global value chains.

In this respect, the UNECE Report emanating from this meeting supported new global initiatives, such as the extensions to Trade in Value Added and Global Input- Output Tables (OECD), the construction of the European Multi-Country Input-Output Framework (EC and Eurostat) as well as the elaboration of a new Handbook on a System of Extended International and Global Accounts (UNSD).

Hence, there is no doubt that globalization is currently affecting the way statisticians are measuring national production of countries and international statistical organizations are indeed very busy working on it in order to meet the policy needs at the worldwide level. As national accounts and input-output tables became an integral part of the production activities of national statistical institutes in the past, very soon multi-country and international input-output tables will become a crucial statistical tool to measure global production, trade in value added, environmental footprints and/or employment effects of export activities with official statistics (e.g. carbon footprint estimated by Eurostat).

Bearing all this in mind, we would like to illustrate in this paper the usefulness of global/world input-output tables in measuring the greenhouse gas footprints of individual countries and its external emission trade balance with respect to others. Hopefully, these types of indicators will soon become regularly produced in the future by statisticians using official global input-output tables instead of using other databases produced as one-off projects (e.g. World Input-Output Database, WIOD – http://www.wiod.org).

 

From 2016 Meeting of the UN Expert Group on International Trade and Globalization Statistics

Concept Note

Following Decision 46/107 taken by the Statistical Commission at its 46th session in 2015, a handbook on a system of extended international and global accounts will be prepared, which will serve as the measurement framework for international trade and economic globalization. This handbook will build on existing work in this area, in particular by the UNECE, the OECD and Eurostat, and address issues of micro-data linking of business and trade statistics, as well as address the integration of economic, environmental and social dimensions of trade and globalization as an extension of the System of National Accounts 2008 (2008 SNA) and the System of Environmental-Economic Accounting 2012 (SEEA 2012).

The first meeting of the expert group is scheduled to take place on 26-28 January 2016 at the UN headquarters in New York. The Handbook is of course the main topic of discussion at this meeting.

The Handbook will refer to and build upon the work of the Friend of the Chair group, which concluded that improved statistics are necessary and should bring a better understanding of the role of the external sector in an economy, the openness of its domestic and foreign markets and the impact of openness on social, economic and environmental upgrading, including the level and quality of employment. More and better data is needed in developed, emerging and developing economies alike: interconnected economies require interconnected statistics and all economies can benefit from a better understanding of these relationships.

As stated in the 2015 FOC report, policymakers and trade negotiators need to understand the cross-country benefits and risks by being able to “look through” the global value chains and see the specific contributions other countries are making to production networks involving their domestic firms. The GVC approach was suggested by the international statistical community as the preferred way of measuring the interconnectedness of economies with respect to jobs, skills, international competitiveness and the creation of value added, income and jobs. The activities involved in GVCs can be grouped into broad stages of production from upstream research and design, through manufacturing, to downstream logistics, marketing and sales. In a GVC, many of the tasks are “offshored”, either through an enterprise’s own affiliates located in foreign countries or through independent contractors. It is this newly emerged international economic integration of production and trade and their governance that has to be better measured and analyzed, including in respect of the benefits, costs and risks associated with engaging in GVCs.

The Handbook can build upon the recommendations and guidelines provided in UNECE’s Guide to Measuring Global Production. This Guide was released at the end of 2015 and provides valuable insights in the functioning and measurement of global value chains. The Guide provides a typology of global production arrangements and describes the principles of ownership inside a multi-national enterprise, as well as ownership of intellectual property products inside global production. In addition, data source and compilation challenges are addressed with special attention to large and complex enterprises.

The Handbook can also build on work presented at the International Conference on Measurement of Trade and Economic Globalization in Mexico in 2014. For example, it could use the value chain reference model to establish alternative aggregations of basic ISIC categories. Those aggregations can be based on enterprise activities in the offshoring of business functions, the use of intermediate inputs, the kinds of basic classes of goods produced and the variety of end markets. The reason for making those distinctions is that it is not possible, in the current ISIC, to distinguish the significant differences between enterprises that operate domestically and those that operate globally. Harmonization of enterprises into groups of similar make-up could significantly improve the accounting structure of the supply and use tables for the analysis of global value chains; harmonization could be achieved in terms of industry, supply chain position, end markets and the extent of the use of business functions being outsourced.

The OECD expert group on extended Supply-Use Tables addresses the estimation methods of trade in value added. The terms of reference of the group states among others that globalization is rapidly changing long-standing assumptions about the relative homogeneity of the production functions (Input-Output technical coefficients) of units classified to a given industrial activity, which is, implicitly, an underlying assumption used in creating input-output based indicators. The increasing prevalence of new types of firms such as factoryless producers and contract processing firms, and the increasing tendency for horizontal, as opposed to vertical, specialization, particularly for multinational affiliates, has fundamentally challenged these assumptions. Therefore, the OECD expert group is looking for the best ways to breakdown firms by specific characteristics (such as involvement in GVCs) which will make the sub-groups more homogeneous.

A GVC approach seems appropriate for the Handbook on a system of extended international and global accounts, since GVCs cut across geographic borders and bring together those global economic activities, goods and services, which belong together. Measurement of economic interdependencies (involving investment, job creation, income and intellectual property) within and across countries — between upstream design and downstream assembly — requires measurement of GVCs. Similarly, if we want to understand the interdependencies within and across countries for global retailers, financial and nonfinancial service providers, as well as horizontally-integrated enterprises, the GVC is the appropriate organizing framework.

This focus on GVCs has important implications for the unit of measurement and related data collection and estimation procedures. Most of the key decisions made by global manufacturers and global service providers are made at the enterprise rather than the establishment, or plant, level. This implies that for multi-national enterprises data on profits, research and development, transfer pricing, final product pricing, design, financing, advertising, and the rest of the links in GVCs are only available at the global enterprise level.

 

How to Integrate National SUIOTS into Global MCIO tables

globalaccounts

 

Key Terms:

  • SUTs (Supply and Use Tables)
  • GVCs (Global Value Chains)
  • UN SEIGA (System of Extended International and Global Accounts)
  • UN SEEA (System of Environment Economic Accounts)
  • Bilateral Trade Matrix
  • TIVA ( Trade in Value Added)
  • MCIO (Multi Country Input Output Tables)
  • SUIOT ( Supply and Use Input Output Tables)
  • UN SNA (System of National Accounts)
  • UNSD ( United Nations Statistical Division)
  • UNECE ( United Nations Economic Commission for Europe)
  • EUROSTAT ( European Statistics Division)
  • IMF
  • UNCTAD (UN Conference on Trade and Development)
  • WTO ( World Trade Organization)
  • OECD
  • UN ITEGS (International Trade and Economic Globalization Statistics)
  • WIOD ( World Input Output Database)
  • FIGARO (Full International and Global Accounts for Research in

    Input-Output Analysis)

 

 

Key Sources of Research:

 

Global Forum on Trade Statistics
Measuring Global Trade — Do We Have the Right Numbers?

Geneva 2011

https://www.wto.org/english/res_e/statis_e/forum_feb11_e/forum_feb11_e.htm

 

 

Eurostat Seminar: Global value chains and economic globalization:

The Eurostat initiative

Dublin Ireland

Date: 18th April 2013

http://www.cso.ie/en/newsandevents/eventsconferencesseminars/eurostatseminarglobalvaluechainsandeconomicglobalizationtheeurostatinitiative/

 

 

International Conference on Measurement of Trade and Economic Globalization

Organized by UNSD and INEGI in cooperation with OECD, WTO and EUROSTAT

Mexico

2014

International Conference on Measurement of Trade and Economic Globalization

 

 

UN Economic Commission for Europe (UNECE) Conference

July 2015 

Geneva

Group of Experts on National Accounts: Measuring Global Production

 

 

UN Conference on developing System of Extended International and Global Accounts

January 2016

New York

System of Extended International and Global Accounts

 

 

 

UN Expert Group on International Trade and Economic Globalization Statistics

Conference November 2016

New York

UN Expert Group on International Trade and Economic Globalization Statistics

 

 

Global Forum on International Trade Statisticsand Economic Globalization

Global Forum on International Trade Statistics and Economic Globalization

 

 

Proposed Outline for a System of Extended International and Global Accounts

 

https://unstats.un.org/unsd/trade/events/2016/newyork-egm/documents/core/Outline%20for%20a%20System%20of%20Extended%20International%20and%20Global%20Accounts%20-%20Oct%202015.pdf

 

 

Meeting of the UN Expert Group on International Trade and Globalization Statistics

 

https://unstats.un.org/unsd/trade/events/2016/newyork-egm/Concept%20Note.pdf

 

 

The relevance of multi-country input-output tables in measuring emissions trade balance of countries: the case of Spain

Teresa Sanz1,∗, Roc ́ıo Yn ̃iguez1 and Jose ́ Manuel Rueda-Cantuche

2016

 

http://www.idescat.cat/sort/sort401/40.1.1.sanz-etal.pdf

 

 

Handbook for a System of Extended International and Global Accounts (SEIGA)

Overview of Major Issues

November 23, 2015 (Revised)

By J. Steven Landefel

 

https://unstats.un.org/unsd/trade/events/2016/newyork-egm/documents/core/Overview%20of%20Major%20of%20Issues%20for%20SEIGA%20-%20Nov%202015.pdf

 

 

Report of the first meeting of the Expert Group on international trade and economic globalization statistics

 

https://unstats.un.org/unsd/statcom/47th-session/documents/BG-2016-23-international-trade-and-economic-globalization-statisitcs-E.pdf

 

 

Background and context

First meeting of the UN Expert Group on international trade and economic globalization statistics,

26-28 January 2016, New York

 

https://unstats.un.org/unsd/trade/events/2016/newyork-egm/presentations/UNSD%20-%20Background%20and%20context.pdf

 

 

Developing A System of Extended International and Global Accounts

Steve Landefeld

 

https://www.unece.org/fileadmin/DAM/stats/documents/ece/ces/ge.20/2015/July/Item_5_SEIGA_Presentation_SEIGA_new.pdf

 

 

Measurement framework for international trade and economic globalization

Group of Experts on National Accounts

18-20 May 2016

Geneva, Switzerland

Herman Smith

 

https://www.unece.org/fileadmin/DAM/stats/documents/ece/ces/ge.20/2016/Item_4d_UNSD_framework_for_international_trade_and_economic_globalization.pdf

 

 

Conference of European Statisticians

Group of Experts on National Accounts Fourteenth session
Geneva, 7-9 July 2015

 

Distr.: General 14 April 2015
Annotated provisional agenda for the fourteenth session

https://www.unece.org/fileadmin/DAM/stats/documents/ece/ces/ge.20/2015/July/Agenda_ENG.pdf

 

 

Measuring International Trade and Economic Globalization

Muscat, Oman, Feb 2016

 

http://gccstat.org/images/gccstat/workshops/IMTSWorkshop-GCCSTAT-UNSD-2016-0-/day1/Pre-Session-UNSD-IT-EconomicGlobalisation.pdf

 

 

Overview of the Implementation of National Accounts at Global Level

United Nations Statistics Division

 

http://www.cepal.org/sites/default/files/events/files/2015-semcn-s2-unsd-ilaria-di-matteo.pdf

 

 

Guide to Measuring Global Production

 

https://unstats.un.org/unsd/trade/events/2016/newyork-egm/documents/background/UNECE%20-%202015%20-%20Draft%20Guide%20to%20Measuring%20Global%20Production%20-%20Sep%202015.pdf

 

 

GLOBAL MULTIREGIONAL INPUT–OUTPUT FRAMEWORKS: AN INTRODUCTION AND

OUTLOOK

Arnold Tukker a b & Erik Dietzenbacher

 

https://unstats.un.org/unsd/trade/events/2016/newyork-egm/documents/background/Tukker%20and%20Dietzenbacher%20-%202013%20-%20Overview%20on%20International%20IO%20Tables.pdf

 

 

TRADE IN VALUE-ADDED: CONCEPTS, METHODOLOGIES AND CHALLENGES (JOINT OECD-WTO NOTE)

 

https://unstats.un.org/unsd/trade/events/2016/newyork-egm/documents/background/OECD-WTO%20-%202012%20-%20Joint%20note%20on%20TiVA.pdf

 

 

OECD EXPERT GROUP ON EXTENDED SUPPLY-USE TABLES

TERMS OF REFERENCE

 

https://unstats.un.org/unsd/trade/events/2016/newyork-egm/documents/background/OECD%20-%202015%20-%20eSUTs_TOR.pdf

 

 

 

GLOBAL VALUE CHAIN ANALYSIS: A PRIMER

Gary Gereffi
&
Karina Fernandez-Stark

https://unstats.un.org/unsd/trade/events/2016/newyork-egm/documents/background/Duke%20-%202011%20-%20GVC_analysis_a_primer.pdf

 

 

CONNECTING LOCAL PRODUCERS IN DEVELOPING COUNTRIES TO REGIONAL AND GLOBAL VALUE CHAINS – UPDATE

Penny Bamber, Karina Fernandez-Stark, Gary Gereffi and Andrew Guinn

https://unstats.un.org/unsd/trade/events/2016/newyork-egm/documents/background/Duke%20-%202013%20-%20Developing%20countries%20and%20GVCs.pdf

 

 

Global Value Chain Analysis on Samsung Electronics

 

https://unstats.un.org/unsd/trade/events/2016/newyork-egm/documents/background/Canada%20-%202012%20-%20GVC%20Analysis%20of%20Samsung%20Electronics.pdf

 

 

Global Value Chains in official business statistics

Martin Luppes, Statistics Netherlands

Peter Bøegh Nielsen, Statistics Danmark

https://unstats.un.org/unsd/trade/events/2016/newyork-egm/documents/background/Luppes%20and%20Nielsen%20-%202015%20-%20Global%20Value%20Chains%20in%20official%20business%20statistics.pdf

 

International Corporate Governance Spillovers: Evidence from Cross-Border Mergers and Acquisitions

Rui Albuquerque, Luis Brandao-Marques, Miguel A. Ferreira, Pedro Matos

 

https://unstats.un.org/unsd/trade/events/2016/newyork-egm/documents/background/IMF%20-%202013%20-%20International%20Corporate%20Governance%20Spillovers.pdf

 

 

Trade Linkages, Balance Sheets, and Spillovers: The Germany-Central European Supply Chain

Selim Elekdag and Dirk Muir

https://unstats.un.org/unsd/trade/events/2016/newyork-egm/documents/background/IMF%20-%202013%20-%20Trade%20Linkages,%20Balance%20Sheets,%20and%20Spillovers.pdf

 

 

THE PRODUCTIVITY ADVANTAGE AND GLOBAL SCOPE OF U.S. MULTINATIONAL FIRMS

Raymond Mataloni, Jr.

 

https://unstats.un.org/unsd/trade/events/2016/newyork-egm/documents/background/US%20Census%20-%202011%20-%20US%20Multinationals.pdf

 

 

Effects of the Crisis on the Automotive Industry in Developing Countries

A Global Value Chain Perspective

Timothy J. Sturgeon Johannes Van Biesebroeck

https://unstats.un.org/unsd/trade/s_geneva2011/refdocs/RDs/Automotive%20Industry%20and%20Crisis%20(Sturgeon%20-%20Jun%202010).pdf

 

 

Value chains, networks and clusters: reframing the global automotive industry

 

Timothy Sturgeon  Johannes Van Biesebroeck and Gary Gereffi

https://unstats.un.org/UNSD/trade/s_geneva2011/refdocs/RDs/Automotive%20Industry%20(Sturgeon%20-%20Apr%202008).pdf

 

 

The PhiliPPines in the aUtoMotiVe global ValUe chain

2016

http://www.cggc.duke.edu/pdfs/2016_Philippines_Automotive_Global_Value_Chain.pdf

 

 

Upgrading and restructuring in the global apparel value chain: why China and Asia are outperforming Mexico and Central America

Stacey Frederick

Gary Gereffi

2011

http://dukespace.lib.duke.edu/dspace/bitstream/handle/10161/10701/2011-08-03_Frederick%20&%20GEREFFI_apparel%20article%20-%20China%20&%20Mexico.pdf;sequence=1

 

 

Combining the Global Value Chain and global I-O approaches

Discussion paper

Dr. Stacey Frederick

2014

 

https://unstats.un.org/unsd/trade/events/2014/mexico/2014-09-29_Frederick,%20Stacey_Combining%20GVC%20and%20global%20I-O%20approaches.pdf

 

 

Sewing Success?

Employment, Wages, and Poverty following the End of the Multi-fibre Arrangement

Editors
Gladys Lopez-Acevedo Raymond Robertson

2012

 

http://siteresources.worldbank.org/EXTPOVERTY/Resources/SewingSuccess_FullReport.pdf

 

 

A measurement framework and a narrative on global value chains and economic globalization

Merja Hult and Pekka Alajääskö

Timothy J. Sturgeon

http://www.statistics.gov.hk/wsc/STS024-P1-S.pdf

 

 

TRADE INTERCONNECTEDNESS: THE WORLD WITH GLOBAL VALUE CHAINS

IMF

2013

 

https://www.imf.org/external/np/pp/eng/2013/082613.pdf

 

 

Global Value Chains

https://www.oecd.org/sti/ind/global-value-chains.htm

 

 

Global value chains

http://ec.europa.eu/eurostat/statistics-explained/index.php/Global_value_chains

 

 

GLOBAL VALUE CHAINS AND Development

INVESTMENT AND VALUE ADDED TRADE IN THE GLOBAL ECONOMY

 

http://unctad.org/en/PublicationsLibrary/diae2013d1_en.pdf

 

 

 

Competing in Global Value Chains

EU Industrial Structure Report 2013

 

http://sev4enterprise.org.gr/wp-content/uploads/2014/05/EKTHESEIS-6.pdf

 

 

Global Value Chains: Development Challenges and Policy Options

Proposals and Analysis

December 2013

http://e15initiative.org/wp-content/uploads/2015/09/E15-Global-Value-Chains-Compliation-Report-FINAL.pdf

 

 

Global Value Chains: The New Reality of International Trade

Sherry Stephenson

December 2013

http://e15initiative.org/wp-content/uploads/2015/09/E15-GVCs-Stephenson-Final.pdf

 

 

World Investment Report 2013: Global Value Chains: Investment and Trade for Development

2013

 

http://unctad.org/en/PublicationsLibrary/wir2013_en.pdf

 

 

Global Production Networks: Theorizing Economic Development in aninterconnected world

By Neil M. Coe, Henry Wai-Chung Yeung

 

 

TRADE IN VALUE ADDED (TIVA) INDICATORS GUIDE TO COUNTRY NOTES

https://www.oecd.org/sti/ind/TiVA_2015_Guide_to_Country_Notes.pdf

 

 

 

TRADE IN VALUE-ADDED: CONCEPTS, METHODOLOGIES AND CHALLENGES

(JOINT OECD-WTO NOTE)

 

http://www.oecd.org/sti/ind/49894138.pdf

 

 

Global value chains in a changing world

Edited by Deborah K. Elms and Patrick Low

WTO 2013

 

https://www.wto.org/english/res_e/booksp_e/aid4tradeglobalvalue13_e.pdf

 

 

GLOBAL VALUE CHAINS IN A POSTCRISIS WORLD

Olivier Cattaneo, Gary Gereffi, and Cornelia Staritz

2010

 

https://openknowledge.worldbank.org/bitstream/handle/10986/2509/569230PUB0glob1C0disclosed010151101.pdf?sequence=1&isAllowed=y

 

 

Making Global Value Chains Work for Development

Daria Taglioni

Deborah Winkler

Currency Credit Networks of International Banks

Currency Credit Networks of International Banks

During the Global Financial Crisis, institutions which were monitoring and regulating Banking systems realized that there are gaps in data to get a better understanding of cross border lending by Banks.

Bank of International Settlement BIS collects and publishes following datasets:

  • Consolidated Banking Statistics (CBS)
  • Locational Banking Statistics (LBS)

 

From US Banks’ International Balance Sheet Linkages: A Data Survey

International financial linkages are mostly established through banks’ lending and borrowing across the borders. Still, very little is known on the actual geographical composition of banks’ foreign balance sheet positions due to the fact that existing bilateral banking statistics is rather incomplete and scant both at the aggregate and micro level ( (Cerutti, et al., 2011); (Fender & Patrick, 2009); (McGuire & von Peter, 2009)). At the micro level, in particular, bilateral positions of banks by location of counterparty are neither collected by the regulator nor available from commercial databases (Herrero & Martinez Peira, 2007).

At the macro level, the Consolidated Banking Statistics (CBS) published by the Bank of International Settlements (BIS) is the most complete data source publicly available on aggregate bilateral claims of banks, available on a comparable cross-country basis and collected according to the nationality principle1. The CBS is best suited to assess country risk, as it reports gross claims of home and worldwide offices reported by national banks to individual foreign countries.

The consolidation within the CBS, however, does not allow to quantify gross cross-border bilateral positions that banks have vis-à-vis their foreign affiliates. Important direct linkages can, indeed, arise through cross-border positions with banks’ foreign-related entities, such as branches or subsidiaries, especially in those countries, such as the US, where foreign-related offices are the largest foreign counterparties of domestic banks.

Moreover, bilateral banking liabilities are not publicly available within the CBS preventing the assessment of other important macro risks arising from international banking activity, most notably funding and global systemic risks. The Committee on the Global Financial System (CGFS) at the the Bank of International Settlements (BIS) has recently announced that the latter limitation is being tackled in the new reporting regime in which banks must disclose also bilateral liabilities a consolidated basis with details of the instrument type (CGFS, 2012). The BIS also collects unconsolidated positions (i.e. both assets and liabilities) of banks located in a given country on all foreigners in the Locational Banking Statistics (LBS), in which bilateral positions are not publicly disclosed2. For the US, however, bilateral foreign unconsolidated banking assets and liabilities are available from the Treasury International Capital System (TICS)3. Coherent to the balance of payment residency principle, the reporting institutions are branches of foreign banks residing in the US which report their positions vis-à-vis all foreigners by foreign country, including related-offices.

Residency-based statistics is ill-suited to assess bi-lateral linkages of US banks as confounding resident foreign and domestic banks does not allow to disentangle the different lending conducts and funding structures4. Also, the foreign counterparty includes foreign branches and subsidiaries of domestic banks as well as parents, branches and subsidiaries of foreign banks resident in the US, hindering a full understanding of the geography of banks’ funding, liquidity and capital allocation.

The aim of this paper is to review all the available data at the macro level in order to both draw a map of the bilateral international balance sheet positions of US banks by counterparty country and stress the data limitations and gaps. Firstly, this paper presents an extensive survey of all available bilateral macro data on international linkages created by US banks’ balance sheets. This investigation details the components and measurements (consolidated vs. unconsolidated data collection) of external positions of US banks. The survey is mainly based on the statistics provided by the Country Exposure Lending Survey (CELS) published by the Federal Financial Institutions Examination Council (FFIEC), upon which the BIS CBS for the US is based, and the US Banking claims and liabilities statistics published by the Treasury International Capital System (TICS). The second part of the paper discusses how data gaps might distort the measurement of important bilateral linkages and suggests how these limitations might be tackled by future research.

In the literature can be found a few papers that bring together existing available datasets to evaluate bi-lateral financial linkages, such as the works by (Lane & Milesi-Ferretti, 2011), (Milesi- Ferretti, et al., 2010) and (Cerutti, 2013). The latter study, in particular, estimates the linkages created by banks’ balance sheet by combining BIS CBS with foreign office data available commercially at the micro-level with the intent of measuring foreign rollover risks.

In this paper it is stressed that consolidated and unconsolidated banking statistics should both include a vis-à-vis country dimension, other than a sectoral and instrument-type segmentation. Moreover, statistics should be segmented enough to allow mapping unconsolidated to consolidated data. In particular, consolidated banking statistics should differentiate claims booked from domestic offices to those from branches and subsidiaries, possibly by host country. Unconsolidated statistics, should disentangle positions booked from domestic banks and foreign banks and vis-à-vis related- offices, possibly identifying the nationality foreign banks. While the statistics enhancements of the CGFS are definitely going towards this direction, this paper suggests that more detailed information should be collected on the funding structure of foreign-related offices, disentangling, when possible, branches by subsidiaries by host country.

 

An overview of bi-lateral foreign exposure of US banks

The linkages created by banks via their international balance sheet positions can be assessed on either a consolidated or unconsolidated basis.

The BIS provides the framework to collect international banking claims on a consolidated basis. The Consolidated Banking Statistics (CBS) provides very useful scope for assessing country risk as its concern is to measure the exposure of the banking sector of a given country i on a foreign country j on a nationality basis: banks are grouped according to their nationality so that all branches of banks with nationality i located worldwide report their positions vis-à-vis the residents of a given country j. Total foreign exposure, namely foreign claims, of the banking sector in i on country j is obtained by summing the consolidated cross-border claims on unaffiliated foreigners in j and local claims of foreign offices established in j. The BIS publishes bilateral foreign claims for the reporting county vis-à-vis the rest of the world by country of location of the counterparty on a quarterly basis. For the US case, more detailed data is available from the Country Exposure Lending Survey (CELS) published by the Federal Financial Institutions Examination Council (FFIEC), upon which the BIS CBS for the US is based.

Banks’ foreign exposure evaluated on an unconsolidated (or locational) basis, on the other hand, complies with the balance of payments principles. Banks are grouped according to their residency so that in a given country i the reporting banks are all those institutions operating in i, including the resident branches of foreign banks. Total foreign exposure is here calculated by measuring unconsolidated cross-border claims only, i.e. claims on all those counterparties which are not domestically located, including related offices. The BIS collects quarterly statistics on unconsolidated banking assets and liabilities, that is, the Locational Banking Statistics (LBS), for a large set of reporting countries, reporting positions broken down by currency, counterparty sector and nationality of banks. Although the BIS collects unconsolidated banking statistics by country of location of the counterparty (i.e. vis-à-vis country dimension), this information is not publicly disclosed hindering a geographical mapping of the counterparties of reporting banks. For the case of US, however, this bilateral assets and liabilities of banks on an unconsolidated basis are published by the US Treasury within the Treasury International Capital System (TICS), upon which the BIS LBS for the US is based.

 

Data Gaps identified during the GFC have been corrected to some extent.  New improved data sets became available in 2015.  Based on this new data, several new papers have been published by BIS.

 

From Enhanced data to analyse international banking

Banks have become larger and more complex over the past 25 years, offering multiple services and products through operations spanning the globe. Some rely heavily on wholesale or non-deposit sources of funding, often from non-bank financial intermediaries about whom information is sparse. Such changes in the international financial system were not well captured in historical data (BIS (2011)). This made it hard to analyse where, in which instruments and on which side of banks’ balance sheets vulnerabilities might emerge, and harder still to assess how vulnerabilities in one part of the financial system might affect other parts. In 2012, the Committee on the Global Financial System (CGFS), which oversees the collection of the BIS international banking statistics (IBS), approved a major set of enhancements to the IBS aimed at filling long-standing data gaps and better capturing the new financial landscape (CGFS (2012)). To a large extent, the enhancements were informed by the Great Financial Crisis of 2007–09, which revealed critical gaps in the information available to monitor and respond to financial stability risks.2 The basic thrust of the enhancements is twofold. First, they expand the coverage of banks’ balance sheets to include their domestic positions, not just their international activities. Second, they provide more information about the sector of banks’ counterparties, in particular banks’ exposures to and reliance on funding from non-bank financial counterparties. The remainder of this feature explains the enhancements in more detail and discusses a few analytical uses of the new data.

 

Overview of the enhancements

The IBS comprise two data sets – the locational banking statistics (LBS) and the consolidated banking statistics (CBS) – each collected using a different methodology. Jointly, they are a key source of information for assessing risks to financial stability, understanding banks’ role in the transmission of shocks across borders, and monitoring changes in internationally active banks’ business models. The principal use of the LBS is to analyse capital flows between countries. They capture the positions of banking offices located in 44 reporting countries on counterparties resident in each of over 200 countries. The LBS are collected following the same principles as national accounts and balance of payments, meaning that their compilation is based on the residence of entities and the data are not adjusted for intragroup or intrasector links. The CBS provide measures of internationally active banks’ country risk exposures. In contrast to the LBS, the CBS are compiled on a nationality basis, using the consolidated approach followed by banking supervisors. The business of offices that are part of the same banking group is consolidated and reported by the country where the controlling parent entity is located.3 Table 1 summarises the breakdowns reported in each data set, and a companion piece in this Review describes the LBS and CBS in more detail. The enhancements approved by the CGFS focused on five areas. First, in both the LBS and the CBS, the coverage of banks’ balance sheets was extended to domestic positions; previously, the data sets captured only banks’ international business. In the LBS, banks are now asked to report their local positions – positions against residents of the country where they are located – in local currency, to complement the existing data on local positions in foreign currencies.4 In the CBS, since end-2013, internationally active banks have reported their worldwide consolidated claims on residents of their home country – the country where the bank’s controlling parent is headquartered. Second, in the CBS, data for the funding side of banks’ consolidated balance sheets were introduced. Previously, very little liability-related information was collected in the CBS: only the local liabilities of banks’ foreign affiliates, and only those denominated in local currency. Since end-2013, banks have reported their total liabilities on a consolidated basis, with a breakdown by instrument.5 They also report their total equity, selected capital measures, and total assets (comprising financial and non-financial assets).

Third, in both the LBS and the CBS, the sectoral breakdown of counterparties was improved. The main improvement was to distinguish between non-bank financial counterparties and non-financial counterparties; previously, the two sectors were grouped together as non-bank entities.6 Banks are also asked to distinguish between different non-financial counterparties: non-financial corporations, households and governments. However, the reporting of the latter breakdown is encouraged, not required, and thus is incomplete (as discussed below). In the LBS, the breakdown of counterparties classified as banks was also improved. Since end- 2013, banks have reported different types of bank counterparties – related banking offices (or intragroup affiliates), unrelated banks and central banks – by residence of the counterparty.7 Fourth, the LBS were refined to provide more granular information by nationality of the reporting bank. In particular, since end-June 2012, four dimensions of data have been jointly reported: the residence and nationality of the reporting bank, the residence of the counterparty, and the currency in which positions are denominated. Previously, no more than three of the four dimensions were jointly reported in either the CBS or LBS (Table 2). Box 1 explains how these new data help clarify the geography of banks’ operations. The more granular information by nationality of the reporting bank is often composed of data reported by very few banks. For example, there are many banks in the United Kingdom that have claims on South Africa, and there are several Australian banks that have offices in the United Kingdom, but there may be only one or two Australian banks in the United Kingdom that have claims on South Africa. If an aggregate comprises data from only one or two banks, then its disclosure risks revealing proprietary information about those banks’ activities. Consequently, reporting authorities classify a significant part of the enhanced data that they report to the BIS as confidential. Such data cannot be disclosed by the BIS, but they can serve as building blocks in the construction of published aggregates that combine data from many reporting countries. While the enhancements made the residence and nationality of reporting banks and the residence of counterparties available simultaneously in the LBS, they did not make the distinction between data by residence and nationality redundant. In particular, the instrument breakdown – loans and deposits, debt securities and other instruments – continues to be reported only for LBS by residence (Table 2). The enhancements also refined the IBS in a number of smaller ways. Banks reporting the LBS are now encouraged to provide an expanded currency breakdown. To complement the LBS by nationality of reporting bank, data by type of bank – branch or subsidiary – are also reported, although without a detailed counterparty country breakdown of cross-border positions. In addition, the quality of the data was improved through closer alignment of reporting practices with the guidelines. For example, authorities in some reporting countries refined sectoral or other classifications. Such methodological changes have sometimes led to significant changes in reported outstanding positions. Finally, the BIS comprehensively revised the tables presenting the IBS so as to include data collected as part of the enhancements (Box 2). The enhancements also prompted the BIS to revisit the way in which some aggregates are calculated or presented, resulting in changes to previously published data (Box 3).

 

From Enhanced data to analyse international banking

06-tab1

 

From Enhanced data to analyse international banking

06-tab2

 

From Enhanced data to analyse international banking

06-graa

 

From Recent enhancements to the BIS statistics

Locational banking statistics by reporting country

One of the enhancements to the international banking statistics (IBS) agreed by the Committee on the Global Financial System following the Great Financial Crisis of 2007–09 was to make the IBS more widely available (CGFS (2012)). The new tables and data published by the BIS in September 2015 were an important step in that direction (Avdjiev et al (2015)). The BIS and central banks continue to work towards publishing more data and improving the tools for accessing them.

Concurrently with this Quarterly Review, the BIS has started publishing more details at the reporting country level from the locational banking statistics (LBS), in particular the claims and liabilities of banks in individual reporting countries on counterparties in more than 200 countries. Previously, the BIS had made public only two types of aggregates in the LBS: the positions of banks in all reporting countries on counterparties in individual countries (Table A6 in the BIS Statistical Bulletin and the BIS Statistics Explorer), and the positions of banks in individual reporting countries on all counterparties abroad (Table A5). The BIS now discloses a matrix of reporting countries and counterparty countries, for the full history of the LBS. For example, whereas previously only the cross-border claims of all LBS-reporting banks on borrowers in China were published, now the location of those reporting banks is also disclosed. This information shows that, at end-March 2016, banks in Hong Kong SAR were the main creditors, accounting for 42% of cross-border claims on China’s mainland borrowers, followed by banks in Chinese Taipei with 9%.

Such geographical details can be used to analyse how shocks might propagate across sectors and borders. For example, they can help track how funds are transferred from sources in one country via banks to users in another. They can also shed light on the complexity of banks’ international operations.

When undertaking such analysis, it is very important to distinguish between the unconsolidated office-level view in the LBS and the consolidated group-level view in the consolidated banking statistics (CBS). The LBS capture the positions of banking offices located in a given country, following the same residency principles as national accounts and balance of payments. By contrast, the CBS capture the worldwide positions of banking groups headquartered in that country, using the consolidated approach followed by banking supervisors. Accordingly, the principal use of the LBS is to analyse capital flows between countries, whereas the CBS provide measures of banks’ country risk exposures.3

The published matrix of reporting countries and counterparty countries covers the cross-border positions of banks located in up to 29 LBS-reporting countries on counterparties in more than 200 countries. As many as eight series are publicly available in the LBS for each reporting-counterparty country pair: total claims and liabilities on counterparties in all sectors and the non-bank sector, and the same details for the instrument component loans and deposits. Selected series are published in Table A6 of the BIS Statistical Bulletin, and all the data can be downloaded from the BIS Statistics Explorer, the BIS Statistics Warehouse or in a single CSV file. A matrix of reporting countries and counterparty countries is also published for the CBS, in Table B4 of the BIS Statistical Bulletin.

 

Table below shows stock positions in different currencies by location and by sector.

From Currency networks in cross-border bank lending

crossborder3

 

From Currency networks in cross-border bank lending

At end-2014, the outstanding stock of BIS IBS cross-border bank claims totalled $28.5 trillion. Using the new dimensions in the Stage 1 data, we can simultaneously identify the nationality of the lending bank and the location of the borrower for 92% ($26.2 trillion) of the global total. Nearly three quarters ($19.3 trillion) of the bilaterally-identified claims represented lending by banks from advanced economies (AEs) to borrowers in AEs (Table 2). The second largest component of global crossborder bank lending was the one from AE banks to offshore centres – it stood at $3.5 trillion (or 13% of the global aggregate). “AE-to-EME” lending (ie lending by AE banks to EME borrowers) was also substantial – it amounted to $2.3 trillion (or 9% of global cross-border lending). Meanwhile, cross-border lending by EME banks, which has been growing rapidly over the past few years, stood at $1.1 trillion or around 4% of global cross-border claims. It was fairly evenly distributed among borrowers from AEs ($395 billion), EMEs ($351 billion) and offshore centres ($205 billion).

Currency networks

More than three-quarters of global cross-border claims were accounted for by lending in two major currencies: the US dollar and the euro. Claims denominated in US dollars alone equalled $13.0 trillion, or 45% of the global total. Meanwhile, crossborder lending denominated in euros stood at $9.0 trillion, or 31% of the global aggregate. The third largest currency denomination, the Japanese yen accounts for only around 5% of the global total. At the aggregate level, the above currency shares are remarkably stable across counterparty sectors (Table 3). The US dollar shares of global cross-border lending to banks (46%) and non-banks (45%) are virtually the same. The same is true for the respective euro shares, with both at 31%. In the case of yen, the difference is more pronounced: cross-border lending to non-banks (6.4%) is almost twice as high as interbank lending (3.6%).

The variation in the currency composition of cross-border lending across locations is considerably larger (Table 3). In terms of lending to advanced economies, the US dollar and euro shares are roughly equal at 41% and 39%, respectively. Approximately half of US dollar-denominated bank lending to advanced economies is accounted for by cross-border claims on residents of the United States ($4.1 trillion). Similarly, the majority ($5.7 trillion) of euro-denominated cross-border bank lending is directed towards borrowers in the euro area – and most ($3.8 trillion) of that amount represents intra-euro area cross-border claims. Outside the United States and the euro area, the US dollar and the euro still dominate lending to advanced economies, albeit with somewhat smaller shares (36% and 25%, respectively).

Lending to EMEs tends to be primarily denominated in US dollars as well. The proportion of cross-border claims on EMEs denominated in US dollars (47%) is more than four times higher than that of the euro (11%). Nevertheless, the aggregate EME numbers mask considerable variations across regions. The US dollar accounts for the majority of the claims on Latin America and on Africa and the Middle East (73% and 61%, respectively). Yet, it accounts for less than half (41%) of the lending to emerging Asia and less than a third (30%) of the lending to emerging Europe. In fact, emerging Europe is the only EME region where the euro is the leading currency with around 41% of all claims. The share of yen is negligible at around 1% of lending to all four EME regions.

The dominance of the US dollar is most pronounced in cross-border claims on offshore centres with a share of nearly two thirds (63%) of the total. Conversely, the respective share for the Japanese yen is merely 11%. The share of the euro is even smaller at 8%.

 

From Drivers of cross-border banking since the Global Crisis

Since the Global Crisis, international credit markets have become more segmented. Figure 1 illustrates the development of cross-border bank claims over the last years; after a continuous and steep increase, the Crisis has led to a retrenchment in cross-border bank lending. Yet, international lending has evolved heterogeneously across regions. While cross-border lending to developing and emerging economies has increased again, foreign bank claims to developed countries have rather continued to decrease.

Even if part of the retrenchment in cross-border bank claims was cyclical, part of the adjustment seems to be structural as the economic recovery did not go along with a notable increase in total foreign bank claims.

What role do policy changes play for adjustments in cross-border bank claims?

The adjustments in international bank lending have led to a debate on how recent policy interventions have affected international capital flows in the aftermath of the crisis.

  • On the one hand, different observers stress the role of changes in financial regulation for the international activities of banks.

After the experiences of the recent Crisis, national regulators may aim at a lower degree of banking globalisation to facilitate the resolution of large, internationally active banks, and hence to better protect taxpayers from potential losses (The Economist 2012). Using bank-level data for the UK banking sector, Rose and Wieladek (2011) have analysed the implications of bank nationalisations for international lending. They present evidence that foreign banks that profited from government support have cut back their lending to the UK. Thus, part of the retrenchment in international bank lending may be due to increased financial protectionism since the crisis.

  • On the other hand, the effects of monetary policy on capital flows – especially to emerging markets – have been intensely debated.

Among others, Bernanke (2013) has pointed out that in an environment of low interest rates, banks may tend to lean their foreign activities towards higher-yielding markets. Nier and Saadi Sedik (2014) point out that managing the large and volatile capital inflows since the Crisis has been costly for emerging markets.

In a recent study (Bremus and Fratzscher 2014), we add to this debate by investigating the effects of policy-related drivers of changes in cross-border bank lending since the Global Crisis.

  • The first question we address is how shifts in banking regulations have affected international bank lending in the wake of the Crisis.

As illustrated by Figure 2, bank capital regulation has, on average, become stricter since the Crisis. In general, tighter regulatory requirements may have different implications for banks’ international lending business. An increase in capital requirements in the source country of cross-border credit may lead to a reduction in credit outflows if banks cut back risky foreign lending activities in order to deleverage. However, stricter regulations in the source country could also lead to an increase in foreign lending activities to countries where regulation is more lenient. Using data from the pre-crisis period, Houston et al. (2012) indeed find that differences in banking regulation are important push and pull factors of cross-border bank lending; banks are attracted by countries with a less restrictive regulatory environment.

In order to study policy-related drivers of changes in international lending between the pre- and the post-Crisis period, we use bilateral credit data for 46 countries from the Bank for International Settlements for the period 2005-2012.[1] Information on capital stringency, supervisory power, and supervisory independence is available from Barth et al. (2013). Following the literature, the years until 2007 can be classified as the ‘pre-crisis’ period, while the years as of 2010 are classified as the ‘post-crisis’ phase. We use a cross-sectional regression model where all variables are expressed as the change between the average across 2005-2007 and the average across 2010-2012.

  • Our results indicate that regulatory policy has been an important driver of adjustments in cross-border banking since the Global Crisis.

Source countries of bilateral credit which have seen a larger increase in supervisory power or independence have extended more cross-border credit. Put differently, the more independent or powerful supervisors got, the less severe was the reduction in cross-border credit in the aftermath of the Crisis. Another interpretation for this result is that stricter regulation in the source country has led to more cross-border lending due to regulatory arbitrage.

With respect to bank capital regulation, the estimation results are similar when the whole country sample is considered. Yet, the larger the differential in capital stringency between the source and the recipient country of cross-border credit in the Eurozone got, the lower the increase (or the larger the reduction) in cross-border lending between these countries.

  • In a second part, we examine which role expansionary monetary policy – as measured by reserve deposits of commercial banks held at central banks – has played for bilateral cross-border lending.

Aggregate reserves at central banks reflect the size of monetary policy interventions (Keister and McAndrews 2009). The more accommodative monetary policy has been since the Crisis, the larger was the increase in total reserves. The estimation results reveal that a larger expansion in source countries’ reserve deposits have come along with smaller reductions (or, larger increases) in credit outflows. Hence, the findings suggest that monetary policy has mitigated credit market fragmentation in the aftermath of the Global Crisis.

Concluding remarks

Our results show that regulatory and monetary policy changes have been important drivers of adjustments in cross-border bank lending since the crisis. While expansionary monetary policy measures have mitigated credit market fragmentation, regulatory policy changes have had mixed effects, depending on the measure and region considered.

More independent and powerful supervisory authorities tend to promote international lending. Our findings indicate that capital regulation should be adjusted in a harmonised and transparent way in order to avoid distortionary lending behaviour, especially in the Eurozone.

 

From The currency dimension of the bank lending channel in international monetary transmission

In this paper, we add to the existing literature on the cross-border bank lending channel of monetary policy by examining how the use of a currency in cross-border lending transmits monetary policy-induced monetary shocks across countries. We do so by using new and unique data on bilateral cross-border lending flows across a wide array of source banking systems and target countries, broken down by currency denomination (USD, EUR and JPY).

We obtain three main results.

First, monetary policy-induced monetary shocks in a currency significantly affect cross-border bank lending flows in that currency, even when neither the lending banking system nor the borrowing country uses that currency as their own. This is what we call the currency dimension of the bank lending channel.

Second, we find that this currency dimension of the bank lending channel works primarily through lending to non-banks.

Third, we find that these currency effects work similarly across the three main currencies, that is, the transmission effects are present in EUR and JPY-lending as much as in USD-lending. All these results are robust across our various specifications, including IV estimations.26

We hope that our results will help policymakers and researchers gain further insight into how the global use of currencies transmits monetary policy shocks through the international banking system. In particular, our results suggest that when policymakers in borrowing countries think about external spillovers to their economies they should explicitly consider the currency denomination of the cross-border claims.

 

 

 

KeySources of Research:

 

Estimating Global Bank Network Connectedness

Mert Demirer Laura Liu

.Francis X. Diebold Kamil Ylmaz

 

2017

 

http://www.ssc.upenn.edu/~fdiebold/papers2/DDLYpaper.pdf

 

 

A network analysis of global banking: 1978–2009

Camelia Minoiu and Javier A. Reyes

2011

 

https://www.imf.org/external/pubs/ft/wp/2011/wp1174.pdf

 

 

Global Banks and Transmission

2013

https://www.fdic.gov/bank/analytical/cfr/bank_research_conference/annual_13th/Goldberg.pdf

 

 

Crisis Transmission in the Global Banking Network

Galina Hale

Tu ̈mer Kapan

Camelia Minoiu

December 31, 2014

 

https://www.bis.org/events/confresearchnetwork1510/hale_paper.pdf

 

 

Currency networks in cross-border bank lending

Stefan Avdjiev and Előd Takáts

September 2015

https://www.bis.org/events/confresearchnetwork1510/takats_paper.pdf

 

 

Monetary policy spillovers and currency networks in cross-border bank lending

by Stefan Avdjiev and Előd Takáts

March 2016

 

http://www.bis.org/publ/work549.pdf

 

 

 

WITHDRAWAL FROM CORRESPONDENT BANKING

WHERE, WHY, AND WHAT TO DO ABOUT IT

2015

 

http://documents.worldbank.org/curated/en/113021467990964789/pdf/101098-revised-PUBLIC-CBR-Report-November-2015.pdf

 

 

Correspondence course: Charting a future for US-dollar clearing and correspondent banking through analytics

2015

 

https://www.pwc.com/us/en/risk-assurance-services/publications/assets/pwc-correspondent-banking-whitepaper.pdf

 

 

Correspondent banking

July 2016

 

http://www.bis.org/cpmi/publ/d147.pdf

 

 

The Withdrawal of Correspondent Banking Relationships: A Case for Policy Action

Michaela Erbenová, Yan Liu, Nadim Kyriakos-Saad, Alejandro López-Mejía, Giancarlo Gasha, Emmanuel Mathias, Mohamed Norat, Francisca Fernando, and Yasmin Almeida

2016

 

https://www.imf.org/external/pubs/ft/sdn/2016/sdn1606.pdf

 

 

FSB action plan to assess and address the decline in correspondent banking

End-2016 progress report and next steps

 

19 December 2016

 

http://www.fsb.org/wp-content/uploads/FSB-action-plan-to-assess-and-address-the-decline-in-correspondent-banking.pdf

 

 

Improving the BIS international banking statistics

http://www.bis.org/publ/cgfs47.pdf

 

 

Enhancements to the BIS international banking statistics

Stefan Avdjiev, Patrick McGuire and Philip Wooldridge

2014

https://www.imf.org/external/pubs/ft/bop/2014/pdf/14-25.pdf

 

 

Enhanced data to analyse international banking

Stefan Avdjiev Patrick McGuire Philip Wooldridge

2015

 

https://www.imf.org/external/pubs/ft/bop/2015/pdf/15-11a.pdf

 

 

 

Recent enhancements to the BIS statistics

BIS Quarterly Bulletin September 2016

http://www.bis.org/publ/qtrpdf/r_qt1609.htm

 

 

 

Enhancements to the International Banking Statistics

By John Lowes and David Osborn

2015

 

http://www.bankofengland.co.uk/statistics/Documents/ms/articles/art2may15.pdf

 

 

Toward a global risk map

Stephen G Cecchetti, Ingo Fender and Patrick McGuire1

Revised Draft May 2010

 

https://pdfs.semanticscholar.org/ed86/7c8a4bf13bf32eab3fbe47da80875f22fedf.pdf

 

 

Bilateral Financial Linkages and Global Imbalances: a View on the Eve of the Financial Crisis

Gian Maria Milesi-Ferretti

Francesco Strobbe

Natalia Tamirisa

This Draft: May 13, 2011

 

http://www.cepr.org/sites/default/files/Milesi-Ferretti_Bilateral%20Financial%20Linkages%20and%20Global%20Imbalances.pdf

 

 

Cross-border financial linkages: Identifying and measuring vulnerabilities

 

 

 

Global banks turning more local: Improved host countries’ financial stability

Gaston Gelos, Frederic Lambert

17 May 2015

http://voxeu.org/article/global-banks-turning-more-local

 

 

Drivers of cross-border banking since the Global Crisis

Franziska Bremus, Marcel Fratzscher

28 January 2015

http://voxeu.org/article/drivers-cross-border-banking-global-crisis

 

 

Systemic Risks in Global Banking What Available Data Can Tell Us and What More Data Are Needed?

Eugenio Cerutti, Stijn Claessens, and Patrick McGuire

 

http://www.nber.org/chapters/c12557.pdf

 

 

US Banks’ International Balance Sheet Linkages: A Data Survey

Carmela D’Avino

2014

 

https://mpra.ub.uni-muenchen.de/69422/1/MPRA_paper_69422.pdf

 

 

G20 Agenda towards a More Stable and Resilient International Financial Architecture

2016

 

http://www.g20.utoronto.ca/2016/g20-international-financial-architecture.pdf

 

 

Cross-Border Interbank Networks, Banking Risk and Contagion

Lena Tonzer

2013

 

http://www.fiw.ac.at/fileadmin/Documents/Publikationen/Working_Paper/N_129-Tonzer.pdf

 

 

Developments in a Cross-Border Bank Exposure “Network”

Masazumi Hattori

Yuko Suda

2007

 

https://www.boj.or.jp/en/research/wps_rev/wps_2007/data/wp07e21.pdf

 

 

Systemic Risks in Global Banking: What Available Data Can Tell Us and What More Data are Needed?

By Eugenio Cerutti, Stijn Claessens and Patrick McGuire

April 18, 2012

 

https://core.ac.uk/download/pdf/6798726.pdf

 

 

Globalisation and Financial Stability Risks: Is the Residency-Based Approach of the National Accounts Old-Fashioned?

Bruno Tissot

 

http://www.iariw.org/dresden/btissot.pdf

 

 

The currency dimension of the bank lending channel in international monetary transmission

Elod Takats and Judit Temesvary

2017-001

 

https://www.federalreserve.gov/econresdata/feds/2017/files/2017001pap.pdf

 

 

Banks and Cross-Border Capital Flows: Policy Challenges and Regulatory Responses

Committee on International Economic Policy and Reform

 

 

 

How the interactions of monetary and regulatory policies may have been ahead of the anti-globalisation backlash
Kristin Forbes, Dennis Reinhardt, Tomasz Wieladek

23 December 2016

http://voxeu.org/article/banking-deglobalisation-spillovers-and-interactions-monetary-and-regulatory-policies

 

 

European bank deleveraging and global credit conditions
Erik Feyen, Ines Gonzalez del Mazo

12 May 2013

http://voxeu.org/article/european-bank-deleveraging-and-global-credit-conditions

The Dollar Shortage, Again! in International Wholesale Money Markets

The Dollar Shortage, Again! in International Wholesale Money Markets

 

During the 2008-2009 global financial crisis, There were many European Banks which got into trouble due to shortage of US Dollar funding in the whole sale international interbank market.  US Federal Reserve eventually extended currency swaps to ECB and other central banks to ease the pressure.

Is it happening now?  There is no banking crisis but there seems to be Dollar Shortage.

 

Foreign Exposure of European Banks

Liquidity Constraints in Global Money Markets (International Interbank Market)

  • Eurodollar Market

Non US Borrowers got funding from FX Market

  • FX Swap
  • Currency Swap

and Non Bank Sources (Shadow Banking)

  • MMMF
  • ABCP

 

Funding and liquidity management

Funding can be defined as the sourcing of liabilities. Funding decisions are usually, but not exclusively, taken in view of actual or planned changes in a financial institution’s assets. The funding strategy sets out how a bank intends to remain fully funded at the minimum cost consistent with its risk appetite. Such a strategy must balance cost efficiency and stability. A strategy which targets a broader funding base may entail higher operating and funding costs, but through diversity provides more stable, reliable funding. One which focuses efforts on generating home currency funding may prove more reliable in adverse times but entail higher costs in normal markets. The balance of cost and benefit will reflect a range of factors (see Section 3). Accordingly, funding risk essentially refers to a bank’s (in-)ability to raise funds in the desired currencies on an ongoing basis. Liquidity management is the management of cash flows across an institution’s balance sheet (and possibly across counterparties and locations). It involves the control of maturity/currency mismatches and the management of liquid asset holdings. A bank’s liquidity management strategy sets out limits on such mismatches and the level of liquid assets to be retained to ensure that the bank remains able to meet funding obligations with immediacy across currencies and locations, while still reflecting the bank’s preferred balance of costs (eg of acquiring term liabilities or holding low-yielding liquid assets) and risks (associated with running large maturity or currency mismatches). Accordingly, liquidity risk refers to a bank’s (in-)ability to raise sufficient funds in the right currency and location to finance cash outflows at any given point in time. Funding and liquidity management are interrelated. Virtually every transaction has implications for a bank’s funding needs and, more immediately, for its liquidity management. The maturity transformation role of banks renders them intrinsically vulnerable to both institution-specific and market-related cash flow risks. The likelihood of an unexpected cash-flow shock occurring, and a bank’s ability to cope with it, will reflect not only the adequacy of its funding and liquidity management strategies, but also their coherence under stressed conditions. A bank’s funding strategy will condition liquidity management needs. Hence, the risks embedded in the chosen funding strategy will translate into risks that liquidity management will have to address. Failure to properly manage funding risk may suddenly manifest itself as a liquidity problem, should those sources withdraw funding at short notice. Conversely, inadequate liquidity risk management may place unmanageable strains on a bank’s funding strategy by requiring very large amounts of funding to be raised at short notice.

 

From The Global Financial Crisis and Offshore Dollar Markets

The Global Shortage of U.S. Dollars

International firms need U.S. dollars to fund their investments in U.S.-dollar-denominated assets, such as retail and corporate loans as well as securities holdings. The funding for these investments is typically obtained from a variety of sources: the unsecured cash markets, the FX swap market, and other shortterm wholesale funding markets.

During the financial crisis, a global shortage of dollars occurred, primarily reflecting the funding needs of European banks. Baba, McCauley, and Ramaswamy (2009) show that European banks had substantially increased their U.S. dollar asset positions from about $2 trillion in 1999 to more than $8 trillion by mid-2007. Until the onset of the crisis, these banks had met their funding requirements mainly by borrowing from the unsecured cash and commercial paper markets and by using FX swaps. Unfortunately, most unsecured funding sources eroded during the crisis. For example, U.S. money market funds abruptly stopped purchasing bank-issued commercial paper after they faced large redemptions associated with the bankruptcy of Lehman Brothers (Baba, McCauley, and Ramaswamy 2009). The reduced availability of dollars resulted in higher dollar funding costs.

The remainder of this article describes the increase in dollar funding costs as reflected in the FX swap market, the primary market enabling global financial institutions to manage multi- currency funding exposures without assuming the credit risk inherent in unsecured funding markets. As liquidity in major unsecured lending markets eroded, the demand for dollar funding through FX swap markets intensified sharply and pushed up the cost of raising dollars through FX swaps. Moreover, heightened demand for dollar funding in conjunction with a reduced willingness to lend dollars noticeably impaired the functioning of the FX swap market, particularly as term liquidity dried up.

 

Measures of Liquidity Tightening

  • LIBOR-OIS Spread
  • FX Swap implied basis spread

 

Two Measures

Two measures are used to show the increased cost of dollar funds in private markets during the crisis.

  • The first is the spread between the London interbank offered rate (Libor) and the overnight index swap (OIS) rate.
  • The second measure is the foreign exchange (FX) swap implied basis spread, which reflects the cost of funding dollar positions by borrowing foreign currency and converting it into dollars through an FX swap.

 

 

dollarshort2

 

 

What are the Money Markets

Wholesale money markets

  • Unsecured cash term deposits and loans
  • Money market calculations and conventions
  • Benchmark rates and their determination
  • Libor
  • Euribor
  • Overnight indexed rates such as Eonia and Sonia
  • Treasury bills (a first look at risk-free)
  • Commercial Paper – CP credit ratings
  • Secured money market loans – sale and repurchase agreements (Repos)

 

Money market derivatives

  • Short term interest rate futures (STIRs): Eurodollar, Short Sterling and Euribor futures
  • Forward rate agreements
  • Interest rate swaps
  • Overnight index swaps (OIS): Sonia and Eonia swaps
  • Monetary policy and the money markets

How a central bank uses money markets to transmit its interest rate intentions.

 

 

OTC US Dollar Money Markets:  Sources of short term Funding

A.  Fed Funds Market (Domestic)

B.  Interbank Money Market

  • Cash Market
  • Market for Short Term Securities
  • Market for Derivatives

Cash Market

  • Unsecured – Eurodollar
  • Secured – REPO
  • Secured (Collateralized markets) – FX Swap Market

Short Term Securities Market

  • T-Bills
  • Commercial Paper
  • Certificate of Deposits

Derivatives Market

  • Interest Rates Swaps

 

 

Money Markets in EU

In the unsecured market, activity is concentrated on the overnight maturity segment. The reference rate in this segment is the Eonia (Euro Overnight Index Average). It is a market index computed as the weighted average of overnight unsecured lending transactions undertaken by a representative panel of banks. The same panel banks contributing to the Eonia also quote for the Euribor (Euro Interbank Offered Rate). The Euribor is the rate at which euro interbank term deposits are offered by one prime bank to another prime bank. This is the reference rate for maturities of one, two and three weeks and for twelve maturities from one to twelve months.11

The market for short term securities includes government securities (Treasury bills) and private securities (mainly commercial paper and bank certificates of deposits).

In the market for derivatives, typically interest rate swaps and futures are traded.

 

Is it happening again?

Policy Decisions such as

  • Rising Interest Rates
  • Stronger Dollar
  • Repatriation of Corporate profits from Europe
  • Unwillingness to extend of CB Swap Lines

can cause liquidity crisis which show up in

  • LIBOR rate
  • Eurodollar rate
  • OIS Rate
  • CIP breakdown
  • EURIBOR
  • TIBOR

 

Breakdown of CIP – Then and Now

 

dollarshort4

 

A brief history of the three key periods of global USD-funding shortfalls:

  • The first episode immediately after the Lehman bankruptcy coincided with a US banking crisis that quickly became a global banking crisis via cross border linkages. Financial globalization meant that Japanese banks had accumulated a large amount of dollar assets during the 1980s and 1990s. Similarly European banks accumulating a large amount of dollar assets during 2000s created structural US dollar funding needs. The Lehman crisis made both European and Japanese banks less creditworthy in dollar funding markets and they had to pay a premium to convert euro or yen funding into dollar funding as they were unable to access dollar funding markets directly.
  • The second episode of very negative dollar basis took place during the Euro debt crisis. The sovereign crisis created a banking crisis making Euro area banks less worthy from a counterparty/credit risk point of view in dollar funding markets. As dollar funding markets including fx swap markets dried up, these funding needs took the form of an acute dollar shortage. European banks and companies that had dollar assets to fund had to pay a hefty premium in fx swap markets to convert their euro funding into dollar funding. Those European banks and companies that were unable to do so, were forced to liquidate dollar assets such as dollar denominated bonds and loans to reduce their need for dollar funding
  • The third phase of very negative dollar basis started at the end of last year. Monetary policy divergence has for sure played a role during the end of 2014 and the beginning of this year. The ECB’s and BoJ’s QE has created an imbalance between supply and demand across funding markets. Funding conditions have become a lot easier outside the US with QE-driven liquidity injections raising the supply of euro and yen funding vs. dollar funding. This divergence manifested itself as one-sided order flow in cross currency swap markets causing a decline in the basis. And we did see these funding imbalances in cross border corporate issuance.

 

Emergent and Related Issues:

  • Global Liquidity
  • Offshore Dollar Money Markets
  • Eurodollar Market
  • International Lender of Last Resort
  • FX Swaps and Currency Swaps Market
  • Cross border funding
  • International Interbank Market
  • Shadow Banking – MMMF, ABCP,
  • LIBOR EURIBOR TIBOR
  • Covered Interest Parity (CIP) Breakdown
  • OIS LIBOR
  • Wholesale Funding Market
  • Global Credit
  • Credit Markets
  • Impact of Global Liquidity on Global Trade
  • Credit Networks of Global Banks
  • International Investment Positions of Banks
  • Derisking by global banks
  • Decline in Correspondent Banking
  • Shortage of Trade Finance

 

Why has Global Trade dropped so precipitously since 2014?

Is it because of shortage of US Dollars?

 

fx17

 

 

Key Sources of Research:

 

“This Is An Extremely Serious Problem” – Dollar Funding Shortage Hits Record In Japan

2016

http://www.zerohedge.com/news/2016-03-17/extremely-serious-problem-dollar-funding-shortage-hits-record-japan

 

 

Global Dollar Shortage Intensifies To Worst Level Since 2012

2015

http://www.zerohedge.com/news/2015-10-03/global-dollar-funding-shortage-intesifies-worst-level-2012

 

 

Dollar Illiquidity Getting Critical: A $10 Trillion Short Which The Fed Does Not Understand

2016

http://www.zerohedge.com/news/2016-11-16/dollar-illiquidity-getting-critical-10-trillion-short-which-fed-does-not-understand

 

 

The VIX Is Dead: According To The BIS, This Is The New “Fear Indicator”

2016

http://www.zerohedge.com/news/2016-11-15/vix-dead-according-bis-new-fear-indicator

 

 

New ICC survey finds worsening global shortage of trade finance

http://www.fx-mm.com/52872/news/trading-news/icc-survey-trade-finance/

 

 

 

A ‘dollar shortage’ has returned. This is why

2016

https://www.weforum.org/agenda/2016/10/a-dollar-shortage-has-returned-this-is-why

 

 

Dollar shortage *alert* (plus global trade *alert*)

2016

https://ftalphaville.ft.com/2016/11/15/2179675/dollar-shortage-alert-plus-global-trade-alert/

 

 

As goes correspondent banking, so goes globalisation

2016

https://ftalphaville.ft.com/2016/07/26/2170875/as-goes-correspondent-banking-so-goes-globalisation/

 

 

How do you solve a problem like de-globalisation?

2015

https://ftalphaville.ft.com/2015/09/24/2140786/how-do-you-solve-a-problem-like-de-globalisation/

 

 

On the ongoing demise of globalisation

2016

https://ftalphaville.ft.com/2016/10/11/2177071/on-the-ongoing-demise-of-globalisation/

 

 

Textbook defying global dollar shortages

2016

https://ftalphaville.ft.com/2016/06/09/2165690/textbook-defying-global-dollar-shortages/

 

 

The Coming Dollar Shortage

https://dailyreckoning.com/coming-dollar-shortage/

 

 

Dollar Shortage Goes Mainstream: When Will The Fed Confess?

2016

http://www.zerohedge.com/news/2016-11-24/dollar-shortage-goes-mainstream-when-will-fed-confess

 

 

The Global Dollar Funding Shortage Is Back With A Vengeance And “This Time It’s Different”

2015

http://www.zerohedge.com/news/2015-03-08/global-dollar-funding-shortage-back-vengeance-set-surpass-lehman-crisis-levels

 

 

The US dollar has been on a tear, and that will spell bad news for the rest of the world

http://markets.businessinsider.com/currencies/news/The-US-dollar-has-been-on-a-tear-and-that-will-spell-bad-news-for-the-rest-of-the-world-1001611294

 

 

There is a war for capital coming, says UBS

2016

https://ftalphaville.ft.com/2016/02/25/2154339/there-is-a-war-for-capital-coming-says-ubs/

 

 

The eurodollar as an economic no-man’s land

2016

https://ftalphaville.ft.com/2016/04/08/2158883/the-eurodollar-as-an-economic-no-mans-land/

 

 

 

Eurodollars, China, TIC data + mysteries

2016

https://ftalphaville.ft.com/2016/03/31/2157947/eurodollars-china-tic-data-mysteries/

 

 

Petrodollars are eurodollars, and eurodollar base money is shrinking

2016

https://ftalphaville.ft.com/2016/01/25/2151037/petrodollars-are-eurodollars-and-eurodollar-base-money-is-shrinking/

 

 

All about the eurodollars

2014

https://ftalphaville.ft.com/2014/09/05/1957231/all-about-the-eurodollars/

 

 

A global reserve requirement for all those eurodollars

2016

https://ftalphaville.ft.com/2016/04/15/2159277/a-global-reserve-requirement-for-all-those-eurodollars/

 

 

On the availability of dollar funding

2015

https://ftalphaville.ft.com/2015/04/01/2125661/on-the-availability-of-dollar-funding/

 

 

The dollar shortage problem, evaluated

2009

https://ftalphaville.ft.com/2009/08/05/65406/the-dollar-shortage-problem-evaluated/

 

 

All about the eurodollars, redux

2015

https://ftalphaville.ft.com/2015/09/24/2140580/all-about-the-eurodollars-redux/

 

 

BIS says we should follow the money

2014

https://ftalphaville.ft.com/2014/09/04/1955881/bis-says-we-should-follow-the-money/

 

 

Eurodollars, FX reserve managers and the offshore RRP issue

2015

https://ftalphaville.ft.com/2015/09/01/2139085/eurodollars-fx-reserve-managers-and-the-offshore-rrp-issue/

 

 

The BoE as eurodollar dealer of last resort?

2015

https://ftalphaville.ft.com/2015/02/20/2119663/the-boe-as-eurodollar-dealer-of-last-resort/

 

 

FT:  The Eurodollar Market: It All Starts Here

2016

http://www.zerohedge.com/news/2016-12-04/eurodollar-market-it-all-starts-here

 

 

From turmoil to crisis: dislocations in the FX swap market before and after the failure of Lehman Brothers

N Baba

http://www.bis.org/publ/work285.htm

 

 

Dollar Funding and Global Banks

Jeremy C. Stein

2012

 

https://www.federalreserve.gov/newsevents/speech/stein20121217a.pdf

 

 

The US dollar shortage in global banking and the international policy response

by Patrick McGuire and Götz von Peter

October 2009

 

http://www.bis.org/publ/work291.pdf

 

 

The US dollar shortage in global banking

 

Patrick McGuire Goetz von Peter

2009

http://www.treasury.nl/files/2009/03/treasury_1196.pdf

 

 

 

Emergent International Liquidity Agreements: Central Bank Cooperation after the Global Financial Crisis

Daniel McDowell

 

http://faculty.maxwell.syr.edu/dmcdowel/mcdowell_eln.pdf

 

 

The Financial Crisis through the Lens of Foreign Exchange Swap Markets

Crystal Ossolinski and Andrew Zurawski

2010

 

https://www.rba.gov.au/publications/bulletin/2010/jun/pdf/bu-0610-7.pdf

 

 

The spillover of money market turbulence to FX swap and cross-currency swap markets

N Baba

2008

 

http://www.bis.org/publ/qtrpdf/r_qt0803h.pdf

 

 

Liquidity Shocks, Dollar Funding Costs, and the Bank Lending Channel During the European Sovereign Crisis

Ricardo Correa, Horacio Sapriza, and Andrei Zlate

2012

 

https://www.federalreserve.gov/pubs/ifdp/2012/1059/ifdp1059.pdf

 

 

GLOBAL INTEGRATION OF BANKING MARKETS: AT WHAT COST?

John L. Simpson

 

https://www.researchgate.net/profile/Simpson_John/publication/228285672_Global_Integration_of_Banking_Markets_At_What_Cost/links/00463515e5285b6a85000000.pdf

 

 

Systemic risk in the major Eurobanking markets: Evidence from inter-bank offered rates

J.L. Simpson, J.P. Evans

2005

 

http://www.doa.kln.ac.lk/Journal/EJournals_3/Global%20Finance%20Journal/Volume%2016/Issue%202/jou2-2.pdf

 

 

The Eurocurrency interbank market: potential for international crises?.

Saunders, Anthony.

Business Review (1988): 17-27.

 

 

The Great Liquidity Freeze: What Does It Mean for International Banking?

Dietrich Domanski and Philip Turner

June 2011

 

https://www.adb.org/sites/default/files/publication/156146/adbi-wp291.pdf

 

 

The Euro-dollar market as a source of United States bank liquidity

Steve B. Steib

 

http://lib.dr.iastate.edu/cgi/viewcontent.cgi?article=6277&context=rtd

 

 

The LIBOR Eclipse: Political Economy of a Benchmark

Alexis Stenfors1 and Duncan Lindo

January 2016

http://www.erensep.org/images/pdf/rmf/discussion_papers/RMF-47_Stenfors-Lindo.pdf

 

 

Basics of U.S. Money Markets

2016

 

https://www.newyorkfed.org/medialibrary/media/banking/usmpi/05.10.2016-moneymarkets-9.15am.pdf

 

 

Implementing Monetary Policy – Short-term Money Markets Monitoring

2015

 

https://www.newyorkfed.org/medialibrary/media/banking/international/09.29.2015-mmarketsv2-1.30pm.pdf

 

 

The Dollar Squeeze of the Financial Crisis

Jean-Marc Bottazzia Jaime Luqueb

Mario R. Pascoac Suresh Sundaresand

 

https://core.ac.uk/download/pdf/6611902.pdf

 

 

Central Bank Dollar Swap Lines and Overseas Dollar Funding Costs

 

 

 

 

The Global Financial Crisis and Offshore Dollar Markets

Niall Coffey, Warren B. Hrung, Hoai-Luu Nguyen, and Asani Sarkar

2009

 

https://papers.ssrn.com/sol3/papers2.cfm?abstract_id=1496407

 

 

 

When and how US dollar shortages evolved into the full crisis?: Evidence from the cross-currency swap market

Naohiko Baba* and Yuji Sakurai†

10/27/2009

http://www.hkimr.org/uploads/seminars/138/sem_paper_0_349_naohiko-baba.pdf

 

 

 

 

Funding patterns and liquidity management of internationally active banks

 

http://www.bankingreview.nl/download/23711

 

 

The functioning and resilience of cross-border funding markets

2010

CGFS 37

http://www.bis.org/publ/cgfs37.pdf

 

 

 

The Impact of the Financial Crisis on Cross-Border Funding

Yaz Terajima, Harri Vikstedt, and Jonathan Witme

2011

 

http://www.bankofcanada.ca/wp-content/uploads/2011/12/fsr-0610-terajima.pdf

 

 

Financial Crises and Risk Premiums in International Interbank Markets 

Shin-ichi Fukuda

Mariko Tanaka

 

https://www.mof.go.jp/english/pri/publication/pp_review/ppr020/ppr020f.pdf

 

 

Dollar Funding and the Lending Behavior of Global Banks

Victoria Ivashina

David S. Scharfstein

Jeremy C. Stein

October 2012

http://www.people.hbs.edu/dscharfstein/dollar_funding_october_2012_final.pdf

 

 

Financial crises and bank funding: recent experience in the euro area

by Adrian van Rixtel and Gabriele Gasperini

March 2013

 

http://www.bis.org/publ/work406.pdf

 

 

The Financial Crisis and Money Markets in Emerging Asia

Robert Rigg and Lotte Schou-Zibell

No. 38 | November 2009

 

https://www.adb.org/sites/default/files/publication/28512/wp38-financial-crisis-money-markets.pdf

 

 

Money Market Integration

Leonardo Bartolini Spence Hilton Alessandro Prati

 

https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr227.pdf

 

 

Segmentation in the U.S. Dollar Money Markets During the Financial Crisis

James J. McAndrews

May 19, 2009

 

https://www.imes.boj.or.jp/english/publication/conf/2009/Session2.pdf

 

 

Re-thinking the lender of last resort

September 2014

 

http://www.bis.org/publ/bppdf/bispap79.pdf

 

 

Towards an International Lender of Last Resort

Stephen G. Cecchetti

September 2014

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2504732

 

 

Global Liquidity: Public and Private

Jean-Pierre Landau

 

 

The Global Dollar System

Stephen G Cecchetti

http://people.brandeis.edu/~cecchett/Polpdf/Polp61.pdf

 

 

US dollar money market funds and non-US banks

Naohiko Baba Robert N McCauley Srichander Ramaswamy

2009

 

http://www.bis.org/publ/qtrpdf/r_qt0903g.pdf

 

 

Improving the Resilience of Core Funding Markets

2009

Bank of Canada

Jean-Sébastien Fontaine, Jack Selody, and Carolyn Wilkins

 

 

How do Global Banks Scramble for Liquidity? Evidence from the Asset- Backed Commercial Paper Freeze of 2007*

by Viral V. Acharya Gara Afonso Anna Kovner

October 24, 2012

 

 

The Financial Crisis and Money Markets in Emerging Asia

Robert Rigg and Lotte Schou-Zibell

No. 38 | November 2009

 

 

Regulatory Reforms and the Dollar Funding of Global Banks:

Evidence from the Impact of Monetary Policy Divergence

Tomoyuki Iida

Takeshi Kimura

Nao Sudo

2016

 

https://www.boj.or.jp/en/research/wps_rev/wps_2016/data/wp16e14.pdf

 

 

Monetary policy spillovers and currency networks in cross-border bank lending

by Stefan Avdjiev and Előd Takáts

March 2016

 

http://www.bis.org/publ/work549.pdf

 

 

FUNDING LIQUIDITY RISK AND DEVIATIONS FROM INTEREST-RATE PARITY DURING THE FINANCIAL CRISIS OF 2007-2009

Prepared by Cho-Hoi Hui, Hans Genberg and Tsz-Kin Chung

2009

 

http://www.hkma.gov.hk/media/eng/publication-and-research/research/working-papers/HKMAWP09_13_full.pdf

 

 

Deviations from Covered Interest Rate Parity

Wenxin Du  Alexander Tepper  Adrien Verdelhan

January 1, 2016

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2768207

 

 

Limits to Arbitrage and Deviations from Covered Interest Rate Parity

 

 

Capital Constraints, Counterparty Risk, and Deviations from Covered Interest Rate Parity

Niall Coffey Warren B. Hrung Asani Sarkar

September 2009

https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr393.pdf

 

 

Covered interest parity lost: understanding the cross-currency basis

Claudio Borio Robert McCauley Patrick McGuire Vladyslav Sushko

2016

http://www.bis.org/publ/qtrpdf/r_qt1609e.pdf

 

 

Bye-bye covered interest parity

Claudio Borio, Robert McCauley, Patrick McGuire, Vladyslav Sushko

28 September 2016

http://voxeu.org/article/bye-bye-covered-interest-parity