The dampening effect of bank foreign liabilities on monetary policy: Revisiting monetary cooperation in East Asia

Xiaofen Chen

Journal of International Money and Finance, 2012, vol. 31, issue 2, 412-427

Abstract: This paper addresses the cost of formal monetary cooperation from the perspective of monetary policy effectiveness. As banks tend to borrow from abroad in foreign currencies to fund domestic lending, monetary policy may have a reduced effect on the credit market and the economy. Results derived from bank level data in East Asia indicate that bank foreign liabilities significantly reduce the effectiveness of the credit channel of monetary policy, implying a relatively low cost of giving up monetary autonomy.

Keywords: Bank foreign liabilities; Monetary policy; Monetary cooperation; Liability dollarization; East Asia (search for similar items in EconPapers)
JEL-codes: E52 F33 G21 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:31:y:2012:i:2:p:412-427

DOI: 10.1016/j.jimonfin.2011.12.004

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