International Transmission of Monetary Policy through Local Money Market Activity by Global Bank Subsidiaries

60 Pages Posted: 29 Mar 2024

Date Written: March 13, 2024

Abstract

We show that an expansive foreign monetary policy, in the country where global banks are headquartered, increases the borrowing activity of their subsidiaries in the local money market where they are located. We use a unique supervisory dataset of tick-by-tick borrowing activity in the Mexican money market. Our findings suggest that the leverage channel of monetary policy transmission can emerge through global banking activity, even without changes in cross-border funding between subsidiaries and their respective headquarters after foreign monetary policy shocks; this is because global banks can also modify leverage through borrowing adjustments of their subsidiaries in local money markets.

Keywords: Global banking, subsidiaries, foreign monetary policy, money markets, cross-border flows

JEL Classification: E52, F36, F42, G15, G21

Suggested Citation

Bechara Bitar, Anuar and Bernales, Alejandro and Canon Salazar, Carlos I., International Transmission of Monetary Policy through Local Money Market Activity by Global Bank Subsidiaries (March 13, 2024). Available at SSRN: https://ssrn.com/abstract=4758373 or http://dx.doi.org/10.2139/ssrn.4758373

Anuar Bechara Bitar

Bank of Mexico ( email )

Alejandro Bernales (Contact Author)

Universidad de Chile ( email )

Diagonal Paraguay 257
Santiago
Chile

HOME PAGE: http://www.alejandrobernales.com

Carlos I. Canon Salazar

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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