The Risk Sensitivity of Global Liquidity Flows - Heterogeneity, Evolution, and Drivers - Staff Report 1149

Sep 18, 2026

The period after the Global Financial Crisis (GFC) saw major risk migration within global liquidity flows, shifting away from cross-border bank lending toward international bond issuance. The study links post-GFC changes in risk sensitivities to tighter balance-sheet (capital and leverage) constraints faced by international lenders and to borrower migration across funding sources. Funding intermediaries with more constrained balance sheets show higher risk sensitivity. It also finds that borrower migration from cross-border loans to international debt securities reduced risk sensitivity toward EME borrowers after the GFC.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages66

Reading Time2 h 46 min

AccessFree to download

Abstract

Introduction

Global Financial Crisis and shifts in global liquidity

Research question and analytical approach

NO . 1149 APRIL 2 0 2 5 The Risk Sensitivity of Global Liquidity Flows: Heterogeneity, Evolution, and Drivers Stefan Avdjiev | Leonardo Gambacorta | Linda S. Goldberg Stefano Schiaffi The Risk Sensitivity of Global Liquidity Flows: Heterogeneity, Evolution, and Drivers Stefan Avdjiev, Leonardo Gambacorta, Linda S. Goldberg, and Stefano Schiaffi Federal Reserve Bank of New York Staff Reports, no. 1149 April 2025 [https://doi.org/10.59576/sr.1149](https://doi.org/10.59576/sr.1149) Abstract 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. JEL classification: G10, F34, G21 Key words: global liquidity, international bank lending, international bond flows, emerging markets, advanced economies Goldberg: Federal Reserve Bank of New York (email: [linda.goldberg@ny.frb.org](linda.goldberg@ny.frb.org)). Avdjiev, Gambacorta: Bank for International Settlements (emails: [stefan.avdjiev@bis.org](stefan.avdjiev@bis.org), [leonardo.gambacorta@bis.org](leonardo.gambacorta@bis.org)). Schiaffi: Bank of Italy (email: stefano.schiaffi@bancaditalia.it) . The authors thank Swapan-Kumar Pradhan, Marjorie Santos, Samantha Hirschhorn, and Jacob Kim-Sherman for analytical and data support. Valuable feedback was provided by Agustin Benetrix, Matthieu Bussiere, Nicola Cetorelli, Stijn Claessens, Camille Graciani, Will Kerry, Rebecca Maher, Thomas Philippon, Giulia Sestieri, Mark Spiegel, Ilhyock Shim, Goetz von Peter, and seminar and conference participants at the 2024 Banque de France/JIMF Global Monetary Policy Spillovers Conference, 2024 CEPR Annual Symposium, the Federal Reserve Bank of Richmond, the Bank of Korea, the Bank for International Settlements, Trinity College Dublin, and Yonsei University. This paper presents preliminary findings and is being distributed to economists and other interested readers solely to stimulate discussion and elicit comments. The views expressed in this paper are those of the author(s) and do not necessarily reflect the position of the Federal Reserve Bank of New York, the Federal Reserve System, the Bank for International Settlements, or the Bank of Italy. Any errors oromissions are the responsibility of the author(s) . To view the authors’ disclosure statements, visit [https://www.newyorkfed.org/research/staff_reports/sr1149.html](https://www.newyorkfed.org/research/staff_reports/sr1149.html). 1 Introduction The Global Financial Crisis (GFC) marked a stark turning point for the volumes, volatility and drivers of cross-border loans (CBL) and international debt securities (IDS), jointly defined as aggregate global liquidity (AGL) . The initial sharp decline in cross-border loans after the GFC was followed by a weak recovery and a second sizable contraction during the peak of the euro area crisis. Meanwhile, growth in international bond issuance remained relatively robust, tilting the balance of international financial intermediation toward bonds and away from loans. The post-GFC shift in the relative importance of the two main global liquidity components has occurred simultaneously with considerable shifts in their sensitivities to global risk (Avdjiev, Gambaco

FAQs

What major change in global liquidity flows occurred after the Global Financial Crisis?

Risk migration shifted global liquidity away from cross-border bank lending toward international bond issuance.

What drives the post-GFC changes in the risk sensitivity of global liquidity flows?

The paper relates them to tighter balance-sheet constraints (capital and leverage) for international lenders and to borrowers migrating across funding sources.

How did the borrower migration affect risk sensitivity toward EME borrowers after the GFC?

The migration from cross-border loans to international debt securities was associated with a decline in risk sensitivity to EME borrowers.

Sep 18, 2026

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