Tracking foreign capital: The effect of capital inflows on bank lending in the UK

Arbeitspapier

This paper examines how UK banks channel capital inflows to the individual sectors of the domestic economy and to overseas residents. Information on the source country of foreign capital deposited with UK banks allows us to construct a novel Bartik instrument for capital inflows. Our results suggest that foreign funds boost bank lending to the domestic economy. This result is due to the positive effect of capital inflows on bank lending to non-financial firms and to other domestic financial institutions. Banks do not channel capital inflows directly to households or the public sector. Much of the foreign capital is also channeled back abroad, reflecting the role of the UK as a global financial center.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Graduate Institute of International and Development Studies Working Paper ; No. HEIDWP10-2019

Classification and Topics

• Classification: Wirtschaft ; International Investment; Long-term Capital Movements ; International Finance: General ; Current Account Adjustment; Short-term Capital Movements ; International Lending and Debt Problems ; Financial Economics: General ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• Subject: capital flows ; bank lending ; credit allocation ; international finance ; instrumental variables ; international financial linkages

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kneer, Christiane ; Raabe, Alexander
• Event: Veröffentlichung
• (who): Graduate Institute of International and Development Studies
• (where): Geneva
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/201706
• Last update: 10.03.2025, 11:43 AM CET