International Bank Lending Channel of Monetary Policy

64 Pages Posted: 22 Nov 2019

See all articles by Silvia Albrizio

Silvia Albrizio

Banco de España

Sangyup Choi

Yonsei University

Davide Furceri

International Monetary Fund (IMF)

Chansik Yoon

Princeton University

Multiple version iconThere are 2 versions of this paper

Date Written: November 20, 2019


How does domestic monetary policy in systemic countries spillover to the rest of the world? This paper examines the transmission channel of domestic monetary policy in the cross-border context. We use exogenous shocks to monetary policy in systemically important economies, including the U.S., and local projections to estimate the dynamic effect of monetary policy shocks on bilateral cross-border bank lending. We find robust evidence that an increase in funding costs following an exogenous monetary tightening leads to a statistically and economically significant decline in cross-border bank lending. The effect is weakened during periods of high uncertainty. In contrast, the effect is found to not vary according to the degree of borrower country riskiness, further weakening support for the international portfolio rebalancing channel.

Keywords: monetary policy spillovers, international bank lending channel, cross-border banking flows, global financial cycles, local projections

JEL Classification: E52, F21, F32, F42

Suggested Citation

Albrizio, Silvia and Choi, Sangyup and Furceri, Davide and Yoon, Chansik, International Bank Lending Channel of Monetary Policy (November 20, 2019). Banco de Espana Working Paper No. 1938, Available at SSRN: or

Silvia Albrizio (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014

Sangyup Choi

Yonsei University ( email )

Korea, Republic of (South Korea)

Davide Furceri

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Chansik Yoon

Princeton University ( email )

Princeton, NJ
United States


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