How does the interaction of macroprudential and monetary policies affect cross-border bank lending?

Elod Takats and Judit Temesvary

No 2019-045, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We combine a rarely accessed BIS database on bilateral cross-border lending flows with cross-country data on macroprudential regulations. We study the interaction between the monetary policy of major international currency issuers (USD, EUR and JPY) and macroprudential policies enacted in source (home) lending banking systems. We find significant interactions. Tighter macroprudential policy in a home country mitigates the impact on lending of monetary policy of a currency issuer. For instance, macroprudential tightening in the UK mitigates the negative impact of US monetary tightening on USD-denominated cross-border bank lending outflows from UK banks. Vice-versa, easier macroprudential policy amplifies impacts. The results are economically significant.

Keywords: Cross-Border Claims; Diff-In-Diff Analysis; Macroprudential Policy; Monetary Policy (search for similar items in EconPapers)
JEL-codes: F34 F42 G21 G38 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2019-06-21
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 (11)

Downloads: (external link)
https://www.federalreserve.gov/econres/feds/files/2019045pap.pdf (application/pdf)

Related works:
Journal Article: How does the interaction of macroprudential and monetary policies affect cross-border bank lending? (2021)
Working Paper: How does the interaction of macroprudential and monetary policies affect cross-border bank lending? (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2019-45

DOI: 10.17016/FEDS.2019.045

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().