The cross-border credit channel and lending standards surveys

The greater availability of bank Senior Loan Officer (SLO) surveys in the past decade is enhancing our understanding of the international bank lending channel of monetary policy. Using a Global VAR (GVAR), we find evidence that expansionary monetary policies in general resulted in lower credit standards, which in turn reinforced the thrust of monetary policy. However, at the time of announcements about unconventional monetary policies, the expansionary impact was muted likely owing to a signaling effect, i.e., signaling a downgrading of underlying economic and financial prospects. Comparisons with the United States and Eurozone economies draw attention to the special role bank-lending standards play in the monetary policy transmission mechanism.