Banking globalization, monetary transmission, and the lending channel

Nicola Cetorelli and Linda Goldberg

No 333, Staff Reports from Federal Reserve Bank of New York

Abstract: The globalization of banking in the United States is influencing the monetary transmission mechanism both domestically and in foreign markets. Using quarterly information from all U.S. banks filing call reports between 1980 and 2006, we show that globalized banks activate internal capital markets with their overseas affiliates to insulate themselves partially from changes in domestic liquidity conditions. The existence of these internal capital markets directly contributes to an international propagation of domestic liquidity shocks to lending by affiliated banks abroad. While these results imply a substantially more active lending channel than documented in Kashyap and Stein (2000), they also imply that the lending channel within the United States is declining in strength as banking becomes more globalized and monetary transmission abroad likewise increases in strength.

Keywords: transmission; lending channel; liquidity; internal capital markets; global; bank (search for similar items in EconPapers)
JEL-codes: E44 F36 G32 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2008-07-01
New Economics Papers: this item is included in nep-mac and nep-mon
Note: For a published version of this report, see Nicola Cetorelli and Linda S. Goldberg, "Banking Globalization and Monetary Transmission," Journal of Finance 67, no. 5 (October 2012): 1811-43.
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Citations: View citations in EconPapers (35)

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Related works:
Working Paper: Banking Globalization, Monetary Transmission, and the Lending Channel (2008)
Working Paper: Banking globalization, monetary transmission and the lending channel (2008)
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