International Spillovers of Monetary Policy: Evidence from France and Italy

37 Pages Posted: 18 Dec 2018

Multiple version iconThere are 2 versions of this paper

Date Written: December 14, 2018

Abstract

In this paper we provide empirical evidence on the impact of US and UK monetary policy changes on credit supply of banks operating in Italy and France over the period 2000–2015, exploring the existence of an international bank lending channel based on the reliance on funding sources located in these two countries or denominated in their currency. We find that US monetary policy tightening leads to a reduction of lending to the domestic economy in both France and Italy, and this is mainly driven by banks that relied more intensely on USD funding markets. Conversely, we find that both French and Italian banks are isolated from UK monetary policy shocks, as most of their UK funding is denominated in Euro, despite being larger than funding from the US.

Keywords: bank lending channel, foreign funding, global banks

JEL Classification: E51, F30, F42, G20

Suggested Citation

Schmidt, Julia and Caccavaio, Marianna and Carpinelli, Luisa and Marinelli, Giuseppe, International Spillovers of Monetary Policy: Evidence from France and Italy (December 14, 2018). ECB Working Paper No. 2216. Available at SSRN: https://ssrn.com/abstract=3302425

Julia Schmidt (Contact Author)

Banque de France ( email )

Paris
France

Marianna Caccavaio

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Luisa Carpinelli

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Giuseppe Marinelli

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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