The Effect of Unconventional Monetary Policy on Cross‐Border Bank Loans: Evidence from an Emerging Market

Abstract

We analyze the impact of quantitative easing by the Federal Reserve, European Central Bank and Bank of England on cross‐border credit flows. Relying on comprehensive loan‐level data, we find that Fed QE strongly boosts cross‐border credit granted to Turkish banks by banks located in the US, Euro Area and UK, while ECB and BoE QEs work only moderately through banks in the EA and UK, respectively. In general QE works at short maturities across bank locations and loan currencies, more strongly for weaker lenders and borrowers, and may have resulted in maturity mismatches in Turkish banks searching for yield.

Keywords: bank lending channel; bank borrowing channel; monetary transmission; quantitative easing (QE); cross‐border bank loans, micro‐level data, capital requirements, financial de‐globalization

JEL Classification: E44; E52; F42; G15; G21