Eichler, S., Littke, H. and Tonzer, L. (2017). Central bank transparency and cross-border banking Journal of International Money and Finance, 74:1--30.
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Affiliated author
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Publication year2017
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JournalJournal of International Money and Finance
{\textcopyright} 2017 Elsevier LtdWe analyze the effect of central bank transparency on cross-border bank activities. Based on a panel gravity model for cross-border bank claims for 21 home and 47 destination countries from 1998 to 2010, we find strong empirical evidence that a rise in central bank transparency in the destination country, on average, increases cross-border claims. Using interaction models, we find that the positive effect of central bank transparency on cross-border claims is only significant if the central bank is politically independent and operates in a stable economic environment. Central bank transparency and credibility are thus considered complements by banks investing abroad.