The US vs. the EU: cross-border bank flows’ origin factor and shadow banking in emerging market economies

ABSTRACT

We explore the relationship between US bank claims and European bank claims on Emerging Market Economies (EMEs) and the level of shadow banking assets in 11 major EMEs over the 18-year period spanning 2002–2019. By using a fixed-effects panel model, we find that cross-border bank flows from US banks and European banks have different effects on shadow banking assets in EMEs. Whereas US bank claims on EMEs have a positive impact on the level of shadow banking assets in EMEs, European bank claims on EMEs are significantly negatively related to the level of shadow banking in EMEs.

KEYWORDS:

• Shadow banking
• cross-border banking flows
• international transmission
• EMEs

JEL CLASSIFICATION:

• F21
• G21
• G23

Acknowledgement

We would like to thank to Professor Shugo Yamamoto for the helpful advice and comments.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Availability of data and material

The authors confirm that the data supporting the findings of this study are available within the article [and/or] its supplementary materials.