The International Bank Lending Channel of Monetary Policy Rates and QE: Credit Supply, Reach-for-Yield, and Real Effects

Ruiz Claudia, Roldán-Peña Jessica, Jose-Luis Peydro and Morais Bernardo
Authors registered in the RePEc Author Service: Jessica Roldán Peña () and Claudia Ruiz Ortega

No 2017-15, Working Papers from Banco de México

Abstract: We identify the international credit channel of monetary policy by analyzing the universe of corporate loans in Mexico matched with firm and bank data, and by exploiting foreign monetary policy shocks in a country with a large presence of European and U.S. banks. The robust results show that a softening of foreign monetary policy increases the supply of credit of foreign banks to Mexican firms. Each regional policy shock mainly affects supply via their respective banks, in turn implying strong real effects, with lower elasticities from QE. The impact of low foreign monetary policy rates and expansive QE is stronger on local borrowers with higher ex-ante loan rates -reach-for-yield- and with higher ex-post loan defaults, thus suggesting an international risk-taking channel of monetary policy. All in all, the results suggest spillovers of core-countries´ monetary policies on emerging markets, both in the foreign monetary softening and tightening part.

Keywords: Monetary policy; financial globalization; quantitative easing (QE); credit supply; risk-taking; foreign banks (search for similar items in EconPapers)
JEL-codes: E52 E58 G01 G21 G28 (search for similar items in EconPapers)
Date: 2017-09
New Economics Papers: this item is included in nep-ban, nep-cba, nep-ifn, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: The International Bank Lending Channel of Monetary Policy Rates and QE: Credit Supply, Reach‐for‐Yield, and Real Effects (2019)
Working Paper: The International Bank Lending Channel of Monetary Policy Rates and QE: Credit Supply, Reach-for-Yield, and Real Effects (2019)
Working Paper: The International Bank Lending Channel of Monetary Policy Rates and QE: Credit Supply, Reach-for-Yield, and Real Effects (2015)
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