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International bank lending channel of monetary policy

Silvia Albrizio (), Sangyup Choi (), Davide Furceri () and Chansik Yoon

Journal of International Money and Finance, 2020, vol. 102, issue C

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: Monetary policy spillovers; International bank lending channel; Cross-border banking flows; Global financial cycles; Local projections (search for similar items in EconPapers)
JEL-codes: E52 F21 F32 F42 (search for similar items in EconPapers)
Date: 2020
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Working Paper: International bank lending channel of monetary policy (2019) Downloads
Working Paper: International Bank Lending Channel of Monetary Policy (2019) Downloads
Working Paper: International Bank Lending Channel of Monetary Policy (2019) Downloads
Working Paper: International Bank Lending Channel of Monetary Policy (2019) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:102:y:2020:i:c:s0261560619305595

DOI: 10.1016/j.jimonfin.2019.102124

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