Transmission of Monetary Policy Through Global Banks: Whose Policy Matters?

Journal of International Money and Finance, Vol 89, December 2018 DOI/10.1016/j.jimonfin.2018.08.013

Posted: 9 Apr 2019

See all articles by Stefan Avdjiev

Stefan Avdjiev

Bank for International Settlements (BIS)

Cathérine Koch

Bank for International Settlements (BIS)

Patrick McGuire

Bank for International Settlements (BIS)

Goetz von Peter

Bank for International Settlements - Research and Policy Analysis

Multiple version iconThere are 2 versions of this paper

Date Written: December 17, 2018

Abstract

This paper explores the basic question of whose monetary policy matters for banks’ international lending. In the international context, monetary policies from several countries could come into play: the lender’s, the borrower’s, and that of a third country, the issuer of the currency in which cross-border lending is denominated. Using the rich dimensionality of the BIS international banking statistics, we find significant effects for all three policies. US monetary easing fuels cross-border lending in US dollars, as befits a global funding currency. At the same time, a tightening in the lender or the borrower country reinforces international dollar lending as global banks turn to the greenback for cheaper funding and toward borrowers abroad. Our results also show that stronger capitalization and better access to funding sources mitigate the frictions underpinning the transmission channels. Analogous results for euro-denominated lending confirm that global funding currencies play a key role in international monetary policy transmission.

Keywords: International banking; Currencies; Monetary policy transmission; International spillovers

Suggested Citation

Avdjiev, Stefan and Koch, Catherine and McGuire, Patrick M. and von Peter, Goetz, Transmission of Monetary Policy Through Global Banks: Whose Policy Matters? (December 17, 2018). Journal of International Money and Finance, Vol 89, December 2018 DOI/10.1016/j.jimonfin.2018.08.013. Available at SSRN: https://ssrn.com/abstract=3354043

Stefan Avdjiev

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Catherine Koch

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Patrick M. McGuire (Contact Author)

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt
Switzerland

Goetz Von Peter

Bank for International Settlements - Research and Policy Analysis ( email )

CH-4002 Basel, Basel-Stadt
Switzerland
+ 41 61 280 8840 (Phone)

HOME PAGE: http://www.bis.org/author/goetz_von_peter.htm

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