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In Lands of Foreign Currency Credit, Bank Lending Channels Run Through?

Steven Ongena, Ibolya Schindele and Dzsamila Vonnák ()
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Steven Ongena: University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR)
Ibolya Schindele: BI Norwegian Business School; Central Bank of Hungary

No 20-104, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We study the impact of monetary policy on the supply of bank credit when bank lending is denominated in foreign currencies. Accessing a comprehensive supervisory dataset from Hungary, we find that the supply of bank credit in a foreign currency is less sensitive to changes in domestic monetary conditions than the equivalent supply in the domestic currency. Changes in foreign monetary conditions similarly affect bank lending more in the foreign than in the domestic currency. Hence when banks lend in multiple currencies the domestic bank lending channel is weakened and international bank lending channels become operational.

Keywords: bank balance-sheet channel; monetary policy; foreign currency lending (search for similar items in EconPapers)
JEL-codes: E51 F3 G21 (search for similar items in EconPapers)
Pages: 92 pages
Date: 2020-10
New Economics Papers: this item is included in nep-cba and nep-mac
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Working Paper: In Lands of Foreign Currency Credit, Bank Lending Channels Run Through? (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp20104

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