NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Leandro Medina

Strategy Policy and Review Department
International Monetary Fund
Washington, DC 20431

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NBER Working Papers and Publications

February 2020The Financial Center Leverage Cycle: Does it Spread Around the World?
with Graciela L. Kaminsky, Shiyi Wang: w26793
With a novel database, we examine the evolution of capital flows to the periphery since the collapse of the Bretton Woods System in the early 1970s. We decompose capital flows into global, regional, and idiosyncratic factors. In contrast to previous findings, which mostly use data from the 2000s, we find that booms and busts in capital flows are mainly explained by regional factors and not the global factor. We then ask, what drives these regional factors. Is it the leverage cycle in the financial center? What triggers the leverage cycle in the financial center? Is it a change in global investors’ risk appetite? Or, is it a change in the demand for capital in the periphery? We link leverage in the financial center to regional capital flows and the cost of borrowing in international ca...

Published: Graciela Laura Kaminsky & Leandro Medina & Shiyi Wang, 2020. "The Financial Center Leverage Cycle: Does It Spread around the World?," AEA Papers and Proceedings, American Economic Association, vol. 110, pages 504-510, May. citation courtesy of

 
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