No. 973 - The risk sensitivity of global liquidity flows: heterogeneity, evolution and drivers

Questioni di Economia e Finanza (Occasional papers)
by Stefan Avdjiev, Leonardo Gambacorta, Linda S. Goldberg and Stefano Schiaffi
October 2025
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The paper analyses the response of the dynamics, composition and allocation across countries of global liquidity volumes to changes in risk conditions, distinguishing between cross-border bank lending and international debt securities issuance. The study also assesses how the risk sensitivity of global liquidity flows is affected by intermediaries' balance sheet constraints and increased reliance on bond issuance.

The risk sensitivity of cross-border bank flows declined sharply after the global financial crisis (GFC), while less stringent budget constraints for non-bank intermediaries compared with banks helped keep the risk sensitivity of international bond issuance high - especially in emerging markets - even though new issuers were less risky on average than in the period prior to the GFC.

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  1. 09 October 2025
    No. 973 - The risk sensitivity of global liquidity flows: heterogeneity, evolution and drivers
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