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

Steven Ongena (), Ibolya Schindele () and Dzsamila Vonnák ()

No 2017/6, MNB Working Papers from Magyar Nemzeti Bank (Central Bank of Hungary)

Abstract: We study the impact of monetary policy on the supply of bank credit when bank lending is also 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)
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac, nep-mon and nep-tra
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:mnb:wpaper:2017/6

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