Macro-prudential policy and banks’ cross-border capital flows

• Název práce v češtině: Makroprudenční politika a bankovní přeshraniční kapitálové toky
• Název v anglickém jazyce: Macro-prudential policy and banks’ cross-border capital flows
• Klíčová slova: Makroprudenční politika, Prudenční a dohledové opatření, Přeshraniční bankovní toky, Úniky, Regulatorní arbitráž, CEE
• Klíčová slova anglicky: Macroprudential policies, Prudential and supervisory measures, Cross-border banking flows, Leakages, Regulatory arbitrage, CEE
• Akademický rok vypsání: 2015/2016
• Typ práce: diplomová práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: doc. PhDr. Adam Geršl, Ph.D.
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 31.07.2018
• Datum zadání: 31.07.2018
• Datum a čas obhajoby: 19.09.2018 08:30
• Místo konání obhajoby: Opletalova - Opletalova 26, O206, Opletalova - místn. č. 206
• Datum odevzdání elektronické podoby: 31.07.2018
• Datum proběhlé obhajoby: 19.09.2018
• Oponenti: prof. PhDr. Petr Teplý, Ph.D.

Zásady pro vypracování

Outline:
1. Motivation and introduction: a brief review of the topic, the problems policies trying to solve and impact on an economy. Explanation why countries use macro-prudential policies and how they affect cross-country flows.
2. Literature review: thesis will review studies which already were conducted in the same area and other literature which can be used for the better formulation of research questions.
3. Data: a review of available data sources, explanation of extending current data sources (Vandenbussche et al.), an explanation how data will be prepared to analysis.
4. Methodology: an explanation of how regressions and VAR to test each one of the hypothesis.
5. Results and discussion: presenting results of the research and discussing hypothesis. Comparison of results to other researches.
6. Conclusion: Summary of the finding and their implications. Explanation of practical implication and proposal of future researches.

Seznam odborné literatury

Reinhardt, Dennis & Sowerbutts, Rhiannon, 2015. Regulatory arbitrage in action: evidence from banking flows and macroprudential policy, Bank of England working papers 546, Bank of England.
Vandenbussche, J., Vogel, U., Detragiache, E., Dec. 2012. Macroprudential Policies and Housing Price. IMF Working Papers 12/303, International Monetary Fund.
International Monetary Fund, 2015. Survey on global macroprudential policy instruments (gmpi).
Bengui, J., Bianchi, J., 2014. Capital flow management when capital controls leak. Working
paper.
Houston, J. F., Lin, C., Ma, Y., October 2012. Regulatory Arbitrage and International Bank
Flows. Journal of Finance 67 (5), 1845-1895.
Barth, J. R., Caprio, G., Levine, R., 2013. Bank regulation and supervision in 180 countries
from 1999 to 2011. Journal of Financial Economic Policy 5 (2), 111-219.

Předběžná náplň práce

In the past decades there were many financial crises, both global crises, and domestic crises. Domestic financial crises were related to weak controls of the systemic risk in the country. Some of the countries, especially emerging economies, applied macro-prudential policies after the crisis in their country or as a prevention.
Objectives of these policies were to limit excessive credit, house price growth, and risk-taking by the banks. The tools applied ranged from adjustments in the regulation (higher minimum capital requirements, higher risk weights on certain exposures, higher provisioning costs) to loan availability criteria (limits on LTV and DTI), and up to administrative ceilings on the credit.
This thesis will check if banks or firms tried to arbitrage these regulatory measures by redirecting their capital flows to cross-border loans.
The theoretical part will analyze literary and empirical evidence and will try to find possible ways of arbitration which banks and other economic agents may exploit.
The empirical part will use data on domestic credit growth, cross-border flows to the economy from international banks, and a database of macro-prudential measures for emerging markets and will examine the data using econometric tools to uncover evidence of arbitration.

Hypotheses:
1. Identify if the cross-country flows increased after macro-prudential policy application from high regulated country to low regulated country.
2. Changes in cross-country flows will start quarter before the macro-prudential application and will not last more than few quarters.
3. Identify which micro-prudential policies can be used to restrict cross-border capital outflows as a result of the macro-prudential policy.

For empirical part of the thesis, the data will be obtained from publicly available sources. Domestic growth data will be obtained from IMF’s World Economic Outlook. Cross-border flows to the economy from international banks data will be obtained from Consolidated BIS International Banking Statistics. Macro-prudential measures for emerging markets will be obtained IMF’s survey on global macro-prudential policy instruments.

The Data analysis will be done using suitable econometric methods. To test first hypotheses will be used univariate OLS regression to compare market share of foreign banks (on which macro-prudential policies not apply), before policy application and after.
To test the second hypothesis will be used univariate OLS to test the significance of macro-prudential policy effects on cross-border capital flows in different countries.
To test the third hypothesis will be used VAR approach to analyzing predicted relationship between Macro and Micro-prudential policy and arbitration using cross-border capital flows.

Expected contribution:
The author will extend database created by Vandenbussche, J., Vogel, U., Detragiache, E., to cross-country flows and to additional countries. It will help to further researchers to compare macro-prudential policies effect on the global economy and will check if theoretical assumptions confirmed by empirical data.
Results can be used for better planning of international reciprocity network and adjusting global macro-prudential policies on the same level.