Substitution between domestic and foreign currency loans in Central Europe. Do central banks matter?

Michal Brzoza-Brzezina, Tomasz Chmielewski and Joanna Niedźwiedzińska

No 1187, Working Paper Series from European Central Bank

Abstract: In this paper we analyse the impact of monetary policy on total bank lending in the presence of a developed market for foreign currency denominated loans and potential substitutability between domestic and foreign currency loans. Our results, based on a panel of four biggest Central European countries (the Czech Republic, Hungary, Poland and Slovakia) confirm significant and probably strong substitution between these loans. Restrictive monetary policy leads to a decrease in domestic currency lending but simultaneously accelerates foreign currency denominated loans. This makes the central bank’s job harder. JEL Classification: E44, E52, E58

Keywords: Central Europe; Domestic and foreign currency loans; monetary policy; substitution (search for similar items in EconPapers)
Date: 2010-05
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-ifn, nep-mac, nep-mon and nep-tra
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Citations: View citations in EconPapers (56)

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Related works:
Working Paper: Substitution between domestic and foreign currency loans in Central Europe. Do central banks matter? (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20101187

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