Global bank lending flows: identifying the flight home effect
No.1, 2017 Global bank lending flows: identifying the flight home effect (Abstract) Caroline Van Rijckeghem and Beatrice Weder di Mauro The authors propose a general specification to estimate the strength of the flight home effect and provide a decomposition into lender and recipient effects with country-by-country measures. Flight home occurs when the change in domestic credit extended by domestic banks cannot be accounted for by recipient or lender effects. Based on break-adjusted BIS data, the authors find evidence of flight home for almost all banking systems with the notable exception of Canada, US and Japan. In periods of relative calm, reversals of the home bias are small. The result is cumulative re-nationalization of bank lending.