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Monetary Policy Spillovers and Currency Networks in Cross-Border Bank Lending: Lessons from the 2013 Fed Taper Tantrum*

Stefan Avdjiev () and Elod Takats

Review of Finance, 2019, vol. 23, issue 5, 993-1029

Abstract: We show that currency networks in cross-border bank lending have a significant impact on the size, distribution, and direction of international monetary policy spillovers. Utilizing a novel dataset, we map the major currency networks in international banking and show that the US dollar dominates at the global level. Next, we provide evidence that during the 2013 Fed taper tantrum, the degree of exposure to US dollar lending had a significant impact on cross-border bank lending growth. Most notably, it had a strong negative impact on cross-border flows to emerging markets.

Keywords: Currency networks; Cross-border banking flows; International monetary policy spillovers (search for similar items in EconPapers)
JEL-codes: F34 G15 G21 (search for similar items in EconPapers)
Date: 2019
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Review of Finance is currently edited by Amit Goyal, Marcin Kacperczyk, Daniel Paravisini, Christine Parlour, Chris Parsons, Joel Peress and Geoffrey Tate

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