Authors: Stefan Avdjiev, Leonardo Gambacorta, Linda S. Goldberg, and Stefano Schiaffi
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Staff Reports
The Risk Sensitivity of Global Liquidity Flows: Heterogeneity, Evolution, and Drivers
Number 1149
April 2025
April 2025
JEL classification: G10, F34, G21
The period after the Global Financial Crisis (GFC) was characterized by a considerable risk migration within global liquidity flows, away from cross-border bank lending towards international bond issuance. We show that the post-GFC shifts in the risk sensitivities of global liquidity flows are related to the tightness of the balance sheet (capital and leverage) constraints faced by international (bank and nonbank) lenders and to the migration of borrowers across funding sources. We document that the risk sensitivity of global liquidity flows is higher when funding is provided by financial intermediaries that are facing greater balance sheet constraints. We also provide evidence that the post-GFC migration of borrowers from cross-border loans to international debt securities was associated with a decline in the risk sensitivity of global liquidity flows to EME borrowers.
Author Disclosure Statement(s)
Steven Avdjiev
I declare that I do not have relevant or material financial interests that relate to the research described in the paper: "The Risk Sensitivity of Global Liquidity Flows: Heterogeneity, Evolution and Drivers." Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Leonardo Gambacorta
I declare that I do not have relevant or material financial interests that relate to the research described in the paper: “The Risk Sensitivity of Global Liquidity Flows: Heterogeneity, Evolution and Drivers.” Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Linda S. Goldberg
The author declares that (s)he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Stefano Schiaffi
I declare that I do not have relevant or material financial interests that relate to the research described in the paper: “The Risk Sensitivity of Global Liquidity Flows: Heterogeneity, Evolution and Drivers.” Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
I declare that I do not have relevant or material financial interests that relate to the research described in the paper: "The Risk Sensitivity of Global Liquidity Flows: Heterogeneity, Evolution and Drivers." Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Leonardo Gambacorta
I declare that I do not have relevant or material financial interests that relate to the research described in the paper: “The Risk Sensitivity of Global Liquidity Flows: Heterogeneity, Evolution and Drivers.” Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Linda S. Goldberg
The author declares that (s)he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Stefano Schiaffi
I declare that I do not have relevant or material financial interests that relate to the research described in the paper: “The Risk Sensitivity of Global Liquidity Flows: Heterogeneity, Evolution and Drivers.” Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Suggested Citation:
Avedjiev, Steven, Leonardo Gambacorta, Linda S. Goldberg, and Stefano Schiaffi. 2025. “The Risk Sensitivity of Global Liquidity Flows: Heterogeneity, Evolution, and Drivers.” Federal Reserve Bank of New York Staff Reports, no. 1149, April. https://doi.org/10.59576/sr.1149
Avedjiev, Steven, Leonardo Gambacorta, Linda S. Goldberg, and Stefano Schiaffi. 2025. “The Risk Sensitivity of Global Liquidity Flows: Heterogeneity, Evolution, and Drivers.” Federal Reserve Bank of New York Staff Reports, no. 1149, April. https://doi.org/10.59576/sr.1149
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