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

Resource Type
  • Forbes, Kristin (MIT-Sloan School of Management)
Publication Date
Free Keywords
prudential regulation; macroprudential regulation; capital flows; sudden stops; surges; risk factors; global financial cycle; extreme capital flow episode
  • Abstract

    This paper tests if prudential and macroprudential regulations have meaningfully reduced the incidence of capital flow “waves”, i.e., of sudden stops and surges of capital flows from abroad. The results support other work documenting changes since 2008 in how global factors affect capital flows, but provide mixed evidence on how regulations have affected the incidence of sharp capital flow movements. Regulations that strengthen banks (such as higher capital-asset ratios) meaningfully reduce the incidence of surges, but tighter macroprudential regulations appear to have done little to reduce the incidence of capital flow waves—and are even correlated with an increased risk of sudden stops. This may reflect their limited use to date, or how they interact with different types of capital flows. Macroprudential regulations may have reduced the volume and volatility of bank flows, but shifted financial intermediation outside the regulated sector and thereby increased the volatility of debt and equity flows. These reforms could still provide important benefits, however, in terms of building the resilience of banks and thereby mitigating the negative effects of capital flow waves on the broader economy. Even if the waters are not much calmer, the waves should do less damage.
Sampled Universe
Smallest Geographic Unit: countries from around world
  • Is supplement to
    DOI: 10.1257/pandp.20201094 (Text)
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  • Is cited by
    DOI: 10.1016/j.jinteco.2012.03.006 (Text)
  • Is cited by
    DOI: 10.1016/j.jmoneco.2016.10.008 (Text)
  • Forbes, Kristin J. “Do Sounder Banks Make Calmer Waters? The Link between Bank Regulations and Capital Flow Waves.” AEA Papers and Proceedings 110 (May 2020): 516–22.
    • ID: 10.1257/pandp.20201094 (DOI)
  • Forbes, Kristin, and Francis Warnock. “Capital Flow Waves--or Ripples? Extreme Capital Flow Movements Since the Crisis.” Cambridge, MA: National Bureau of Economic Research, 2020.
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  • Zohair, Alam, Adrien Alter, Jesse Eisan, R.G. Gelos, Heedon Kang, Machiko Narita, Erlend Nier, and Naixi Wang. “Digging Deeper--Evidence on the Effects of Macroprudential Policies from a New Database.” Washington, DC: International Monetary Fund, March 22, 2019.
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  • “Global Financial Development Database.” The World Bank, October 2019.
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  • Ahnert, Toni, Kristin Forbes, Christian Friedrich, and Dennis Reinhardt. “Macroprudential FX Regulations: Shifting the Snowbanks of FX Vulnerability?” Journal of Financial Economics forthcoming (forthcoming).
  • Forbes, Kristin J., and Francis E. Warnock. “Capital Flow Waves: Surges, Stops, Flight, and Retrenchment.” Journal of International Economics 88, no. 2 (November 2012): 235–51.
    • ID: 10.1016/j.jinteco.2012.03.006 (DOI)
  • Forbes, Kristin, Dennis Reinhardt, and Tomasz Wieladek. “The Spillovers, Interactions, and (Un)Intended Consequences of Monetary and Regulatory Policies.” Journal of Monetary Economics 85 (January 2017): 1–22.
    • ID: 10.1016/j.jmoneco.2016.10.008 (DOI)

Update Metadata: 2020-05-18 | Issue Number: 6 | Registration Date: 2020-02-05