How Does Fiscal Policy affect the Transmission of Monetary Policy into Cross-border Bank Lending? Cross-country Evidence

Swapan-Kumar Pradhan (), Elod Takats and Judit Temesvary
Additional contact information
Swapan-Kumar Pradhan: https://www.bis.org/author/swapan-kumar_pradhan.htm

No 1400, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We use a rarely accessed BIS database on bilateral cross-border bank claims by bank nationality to examine the interaction of monetary and fiscal policies. We find significant interactions: the transmission of the monetary policies of major currency issuers is significantly influenced by the fiscal stance of source (home) lending banking systems. Fiscal consolidation in a source country amplifies the effect of currency issuers' monetary policy on lending. For instance, a reduction in the German debt-to-GDP ratio amplifies the negative impact of US monetary policy tightening on USD-denominated cross-border bank lending outflows from German banks. The interaction effects are the strongest for US monetary policy.

Keywords: Monetary policy; Government debt; Cross-border claims; Difference-in-differences (search for similar items in EconPapers)
JEL-codes: E63 F34 F42 G21 G38 (search for similar items in EconPapers)
Date: 2024-11-25
New Economics Papers: this item is included in nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.federalreserve.gov/econres/ifdp/files/ifdp1400.pdf (application/pdf)

Related works:
Working Paper: How does fiscal policy affect the transmission of monetary policy into cross-border bank lending? Cross-country evidence (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1400

DOI: 10.17016/IFDP.2024.1400

Access Statistics for this paper

More papers in International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().