The role of non-bank financial institutions in cross-border spillovers

The growing presence of non-bank financial institutions (NBFIs) helps to develop financial markets, yet it can also impact a country's vulnerability to cross-border spillovers. The risk of cross-border spillovers is especially acute for NBFIs' dollar positions. Other potential sources of spillovers include currency and liquidity mismatches on NBFIs' balance sheets, NBFIs' use of leverage, and herding. Evidence about whether the greater involvement of NBFIs has aggravated the procyclicality and intensity of cross-border spillovers is mixed.

JEL classification: F36, G15, G23

Keywords: non-bank financial institutions, international spillovers, financial integration, capital flows