Regulatory regime differences may drive international capital flows, study argues
Tighter regulation in one country may prompt more borrowing abroad
National differences in regulation may help drive international capital flows, a working paper published this month by the Bank of England argues.
In Regulatory arbitrage in action: evidence from banking flows and macroprudential policy, Dennis Reinhardt and Rhiannon Sowerbutts examine the impact of capital regulation, lending standards and reserve requirements on international capital flows.
They find tighter capital regulation in one country will prompt non-banking institutions to increase
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