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The Currency Dimension of the Bank Lending Channel in International Monetary Transmission

Elod Takats and Judit Temesvary ()

No 2017-001, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We investigate how the use of a currency transmits monetary policy shocks in the global banking system. We use newly available unique data on the bilateral cross-border lending flows of 27 BIS-reporting lending banking systems to over 50 borrowing countries, broken down by currency denomination (USD, EUR and JPY). We have three main findings. First, monetary shocks in a currency significantly affect cross-border lending flows in that currency, even when neither the lending banking system nor the borrowing country uses that currency as their own. Second, this transmission works mainly through lending to non-banks. Third, this currency dimension of the bank lending channel works similarly across the three currencies suggesting that the cross-border bank lending channel of liquidity shock transmission may not be unique to lending in USD.

Keywords: Bank lending channel; Cross-border bank lending; Currency denomination; Monetary transmission (search for similar items in EconPapers)
JEL-codes: E5 F42 G21 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2017-01
New Economics Papers: this item is included in nep-ban, nep-cba, nep-ifn, nep-mac, nep-mon and nep-opm
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Related works:
Journal Article: The currency dimension of the bank lending channel in international monetary transmission (2020) Downloads
Working Paper: The currency dimension of the bank lending channel in international monetary transmission (2016) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2017-01

DOI: 10.17016/FEDS.2017.001

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