Bank globalization and the balance sheet channel of monetary transmission

Sami Alpanda and Uluc Aysun
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Sami Alpanda: Amherst College

No 2010-20, Working papers from University of Connecticut, Department of Economics

Abstract: The literature typically finds that the development of financial markets has decreased the ability of central banks to affect the real economy. This paper shows that this negative relationship does not hold for the balance sheet channel of monetary transmission and bank globalization -- one aspect of financial development. The reason is that global banks are more sensitive to borrowers' leverage. By affecting this leverage, monetary policy has a larger impact on global banks' lending and aggregate economic activity. We use bank-level, Call Report data to obtain this disparity between more and less global banks. We then use this data in the estimation of a general equilibrium model and find that the balance sheet channel of monetary policy operates mainly through more global banks.

Keywords: balance sheet channel; bank globalization; financial accelerator (search for similar items in EconPapers)
JEL-codes: E44 F31 F41 O16 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2010-07
New Economics Papers: this item is included in nep-acc, nep-ban, nep-cba, nep-dge, nep-mac, nep-mon and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:2010-20

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