The international transmission of monetary policy through financial centres: evidence from the United Kingdom and Hong Kong

Robert Hills, Kelvin Ho, Dennis Reinhardt, Rhiannon Sowerbutts, Eric Wong () and Gabriel Wu ()
Additional contact information
Eric Wong: Hong Kong Monetary Authority, Postal: Hong Kong Monetary Authority
Gabriel Wu: Hong Kong Monetary Authority, Postal: Hong Kong Monetary Authority

No 682, Bank of England working papers from Bank of England

Abstract: This paper explores the cross-border transmission of monetary policy by comparing and contrasting the results for two major international financial centres: Hong Kong and the United Kingdom. We examine the effect of monetary policy in the US, euro area and Japan, on UK and Hong Kong-resident banks’ domestic lending behaviour, using individual bank-level data. Focusing on financial interconnections and other balance sheet characteristics as a transmission mechanism, we find that both of these factors play an important role in the transmission of foreign monetary policy. We are able to establish evidence for both a bank funding and bank portfolio channel of monetary policy, for both Hong Kong and the United Kingdom. There are important differences between the two countries; in particular, the currency denomination of lending appears to play a major role only in the United Kingdom, which probably reflects Hong Kong’s linked exchange rate system by which the HK dollar is pegged with the US dollar. These results contrast to the largely inconclusive results from previous studies, whose aggregate nature may have masked offsetting individual bank effects.

Keywords: International financial linkages; monetary policy transmission; bank lending (search for similar items in EconPapers)
JEL-codes: E52 F42 G21 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2017-10-16
New Economics Papers: this item is included in nep-acc, nep-ban, nep-cba, nep-ifn, nep-mac, nep-mon and nep-opm
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 transmission of monetary policy through financial centres: Evidence from the United Kingdom and Hong Kong (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0682

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