The Cross-Border Credit Channel and Lending Standards Surveys

49 Pages Posted: 22 May 2018

See all articles by Andrew J. Filardo

Andrew J. Filardo

Bank for International Settlements (BIS) - Monetary and Economic Department

Pierre L. Siklos

Wilfrid Laurier University - School of Business & Economics; Balsillie school of international affairs

Date Written: May 9, 2018

Abstract

This paper argues that a measure of lending conditions - Senior Loan Officer (SLO) surveys - offers important insights into the monetary transmission mechanism. Using a Global VAR (GVAR) and SLO survey data from 16 countries, we document bank lending standards' significant role in explaining the dynamics of domestic credit conditions. Changes in lending attitudes lead to spillovers of financial conditions to other advanced and emerging market economies. We also examine the interaction of unconventional monetary policies (UMPs) and lending attitudes by using an external high frequency instrument. Looking through this lens of UMPs, we see that expansionary monetary policy led to a lowering of domestic credit standards which amplified the impact of the initial monetary stimulus. However, we also find evidence that the need to resort to UMPs also brought about a decline in lending demand, raising questions about whether the signaling channel of monetary policy unintentionally worked at cross purposes by sapping the full effectiveness of these policies. The varied experiences in the United States and euro area draw attention to the relative importance of bank intermediation in determining the strength of the bank lending channel of monetary policy.

Keywords: global VAR, lending standards and credit conditions, unconventional monetary policies, spillovers

JEL Classification: F44, F36, F15, E5, E32

Suggested Citation

Filardo, Andrew J. and Siklos, Pierre L., The Cross-Border Credit Channel and Lending Standards Surveys (May 9, 2018). BIS Working Paper No. 723. Available at SSRN: https://ssrn.com/abstract=3179497

Andrew J. Filardo (Contact Author)

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Pierre L. Siklos

Wilfrid Laurier University - School of Business & Economics ( email )

Department of Economics
75 University Avenue W.
Waterloo, Ontario N2L 3C5
Canada
519-884-0710 Ext.. 3491 (Phone)

HOME PAGE: http://pierrelsiklos.com

Balsillie school of international affairs ( email )

67 Erb Street West
Waterloo, ON N2L 6C2
Canada

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