U.S. monetary policy and emerging market credit cycles
Falk Bräuning and
Journal of Monetary Economics, 2020, vol. 112, issue C, 57-76
Foreign banks’ lending to firms in emerging market economies (EMEs) is large and denominated predominantly in U.S. dollars. This creates a direct connection between U.S. monetary policy and EME credit cycles. We estimate that over a typical U.S. monetary easing cycle, EME borrowers experience a 32-percentage-point greater increase in the volume of loans issued by foreign banks than do borrowers from developed markets, followed by a fast credit contraction of a similar magnitude upon reversal of the cycle. Consistent with a risk-driven credit-supply adjustment, we show that the spillover is stronger for riskier EMEs, and, within countries, for higher-risk firms.
Keywords: Global credit cycle; Monetary policy; Emerging markets (search for similar items in EconPapers)
JEL-codes: E52 F34 F44 G21 (search for similar items in EconPapers)
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Working Paper: U.S. Monetary Policy and Emerging Market Credit Cycles (2018)
Working Paper: U. S. monetary policy and emerging market credit cycles (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:112:y:2020:i:c:p:57-76
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