International Bank Lending Channel of Monetary Policy

Silvia Albrizio, Sangyup Choi, Davide Furceri and Chansik Yoon

No 2019/234, IMF Working Papers from International Monetary Fund

Abstract: How does domestic monetary policy in systemic countries spillover to the rest of the world? This paper examines the transmission channel of domestic monetary policy in the cross-border context. We use exogenous shocks to monetary policy in systemically important economies, including the U.S., and local projections to estimate the dynamic effect of monetary policy shocks on bilateral cross-border bank lending. We find robust evidence that an increase in funding costs following an exogenous monetary tightening leads to a statistically and economically significant decline in cross-border bank lending. The effect is weakened during periods of high uncertainty. In contrast, the effect is found to not vary according to the degree of borrower country riskiness, further weakening support for the international portfolio rebalancing channel.

Keywords: WP; monetary policy shock; Monetary policy spillovers; International bank lending channel; Cross-border banking flows; Global financial cycles; Local projections; lending channel; channel of monetary policy; monetary policy action; shock series; FOMC monetary policy announcement; standard error; Bank credit; Cross-border banking; International banking; Monetary tightening; Central bank policy rate; Global (search for similar items in EconPapers)
Pages: 61
Date: 2019-11-01
New Economics Papers: this item is included in nep-mon
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Citations: View citations in EconPapers (10)

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Related works:
Journal Article: International bank lending channel of monetary policy (2020)
Working Paper: International bank lending channel of monetary policy (2019)
Working Paper: International Bank Lending Channel of Monetary Policy (2019)
Working Paper: International Bank Lending Channel of Monetary Policy (2019)
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