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

31 Pages Posted: 8 Jan 2017

See all articles by Előd Takáts

Előd Takáts

Bank for International Settlements (BIS)

Judit Temesvary

Federal Reserve Board

Multiple version iconThere are 3 versions of this paper

Date Written: 2017-01

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

JEL Classification: E5, F42, G21

Suggested Citation

Takáts, Előd and Temesvary, Judit, The Currency Dimension of the Bank Lending Channel in International Monetary Transmission (2017-01). FEDS Working Paper No. 2017-001. Available at SSRN: https://ssrn.com/abstract=2894824 or http://dx.doi.org/10.17016/FEDS.2017.001

Előd Takáts (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Judit Temesvary

Federal Reserve Board ( email )

1801 K Street
Washington, DC 20006
United States
202-452-3759 (Phone)

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