The role of US bank liquidity and regulations in Covered Interest Parity deviations

IF 6.1 2区经济学 Q1 BUSINESS, FINANCE

Journal of International Financial Markets Institutions & Money Pub Date : 2025-06-02 DOI:10.1016/j.intfin.2025.102173

Walter Bazán-Palomino, Marco Ortiz, Marco E. Terrones, Diego Winkelried

引用次数: 0

Abstract

This paper examines how private bank regulation and liquidity provided by the Federal Reserve in the US are related to deviations from the covered interest parity (CIP). We find evidence that the effects of bank liquidity on CIP deviations partially offset those resulting from regulatory changes in a sample of 11 OECD countries over the 2001-2019 period. This finding supports the conjecture that changes in private banks’ liquidity and regulation can significantly affect the cross-currency basis. Interestingly, the effects of liquidity on CIP deviations become more pronounced as bank regulation intensifies, reflecting interaction effects. One implication is that stricter regulations may amplify liquidity-related distortions, thereby increasing CIP deviations.

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美国银行流动性和监管在利差平价偏离中的作用

本文考察了美国联邦储备委员会提供的私人银行监管和流动性如何与偏离覆盖利率平价（CIP）相关。我们发现有证据表明，在2001-2019年期间，11个经合组织国家的样本中，银行流动性对CIP偏差的影响部分抵消了监管变化带来的影响。这一发现支持了私人银行流动性和监管变化会显著影响跨货币基差的猜想。有趣的是，流动性对CIP偏差的影响随着银行监管的加强而变得更加明显，反映了交互效应。一个暗示是，更严格的监管可能会放大流动性相关的扭曲，从而增加CIP偏差。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of International Financial Markets Institutions & Money Multiple-

CiteScore

6.60

自引率

10.00%

发文量

142

期刊介绍： International trade, financing and investments, and the related cash and credit transactions, have grown at an extremely rapid pace in recent years. The international monetary system has continued to evolve to accommodate the need for foreign-currency denominated transactions and in the process has provided opportunities for its ongoing observation and study. The purpose of the Journal of International Financial Markets, Institutions & Money is to publish rigorous, original articles dealing with the international aspects of financial markets, institutions and money. Theoretical/conceptual and empirical papers providing meaningful insights into the subject areas will be considered. The following topic areas, although not exhaustive, are representative of the coverage in this Journal. • International financial markets • International securities markets • Foreign exchange markets • Eurocurrency markets • International syndications • Term structures of Eurocurrency rates • Determination of exchange rates • Information, speculation and parity • Forward rates and swaps • International payment mechanisms • International commercial banking; • International investment banking • Central bank intervention • International monetary systems • Balance of payments.