Cross-Border Spillovers of Monetary Policy: What Changes During a Financial Crisis?

35 Pages Posted: 8 Aug 2018

See all articles by Luciana Barbosa

Luciana Barbosa

Bank of Portugal - Economic Research Department

Diana Bonfim

Banco de Portugal; Catholic University of Portugal (UCP) - Catolica Lisbon School of Business and Economics

Sónia Costa

Bank of Portugal

Mary Everett

Central Bank of Ireland

Date Written: July 20, 2018

Abstract

This paper analyses cross-border spillovers of monetary policy by examining two countries that were in the eye of the storm during the euro area sovereign debt crisis, namely Ireland and Portugal. The research provides insight as to how banking and sovereign stress affect the inward transmission of foreign monetary policy to two economies that share many characteristics, but that also have many distinct features. In particular, our research addresses the question of whether a banking system in distress reacts more or less to monetary policy changes in other major economies. The empirical analysis indicates that international spillovers are present for US and UK monetary policy for both Ireland and Portugal, but there is heterogeneity in the transmission mechanisms by which they affect credit growth in the two economies.

Keywords: cross-border banking, euro area sovereign crisis, unconventional monetary policy spillovers, credit supply

JEL Classification: F60, G15, G21

Suggested Citation

Barbosa, Luciana and Bonfim, Diana and Costa, Sónia and Everett, Mary, Cross-Border Spillovers of Monetary Policy: What Changes During a Financial Crisis? (July 20, 2018). Available at SSRN: https://ssrn.com/abstract=3217356 or http://dx.doi.org/10.2139/ssrn.3217356

Luciana Barbosa

Bank of Portugal - Economic Research Department ( email )

R. do Ouro, 27
Lisboa, 1100-150
Portugal

Diana Bonfim (Contact Author)

Banco de Portugal ( email )

Av Almirante Reis, 71
P-1150-012 Lisboa
Portugal

Catholic University of Portugal (UCP) - Catolica Lisbon School of Business and Economics ( email )

Palma de Cima
Lisbon, 1649-023
Portugal

Sónia Costa

Bank of Portugal ( email )

Rua Francisco Ribeiro, 2
Lisbon, 1150-165
Portugal

Mary Everett

Central Bank of Ireland ( email )

P.O. Box 559
Dame Street
Dublin, 2
Ireland

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