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The currency dimension of the bank lending channel in international monetary transmission

Elod Takats and Judit Temesvary ()

Journal of International Economics, 2020, vol. 125, issue C

Abstract: We investigate how the use of a currency transmits monetary policy changes in the global banking system. We use a newly available rarely accessed dataset on the bilateral cross-border lending flows of 27 BIS-reporting lending banking systems to borrowers in 51 countries, broken down by currency denomination (USD, EUR and JPY). We have three main findings. First, we identify a currency dimension of the international bank lending channel: monetary changes in a currency significantly affect cross-border lending flows in that currency, even when neither the lending banking system nor the target country uses that currency as their own. Second, this transmission works mainly through lending to non-banks. Third, the currency dimension of the bank lending channel works similarly across the three currencies, suggesting that the USD may not be unique in this respect.

Keywords: Cross-border bank lending; Bank lending channel; Monetary transmission; Currency denomination (search for similar items in EconPapers)
JEL-codes: E5 F42 G21 (search for similar items in EconPapers)
Date: 2020
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Related works:
Working Paper: The Currency Dimension of the Bank Lending Channel in International Monetary Transmission (2017) Downloads
Working Paper: The currency dimension of the bank lending channel in international monetary transmission (2016) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:125:y:2020:i:c:s0022199618301818

DOI: 10.1016/j.jinteco.2020.103309

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