Banking Globalization and Capital Flows | Clausen Center

Banking Globalization and Capital Flows

by Leslie Sheng Shen (UC Berkeley)

This project aims to provide a new perspective on international capital flows. The dramatic rise in banking globalization and bank capital flows over the past two decades has altered the landscape of intermediated finance in the international economy and entails profound implications for international business cycle comovement and the transmission of financial and macroeconomic shocks across borders. This project studies the patterns of global intermediated flows and analyzes the economic forces underlying the decision-making that gives rise to cross-border financial contractual relationships between banks and firms and generates such flows. The question posed is whether global banks are equipped differently to serve counterparties compared to local banks. Moreover, for foreign firms that seek global funding, why and how do they decide between intermediated vs. disintermediated forms of finance in the international financial market? The project also explores the implications of such contractual relationships and decision-making on the patterns and composition of capital flows and global liquidity.

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