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The dampening effect of bank foreign liabilities on monetary policy: Revisiting monetary cooperation in East Asia

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  • Chen, Xiaofen
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    Abstract

    This paper addresses the cost of formal monetary cooperation from the perspective of monetary policy effectiveness. As banks tend to borrow from abroad in foreign currencies to fund domestic lending, monetary policy may have a reduced effect on the credit market and the economy. Results derived from bank level data in East Asia indicate that bank foreign liabilities significantly reduce the effectiveness of the credit channel of monetary policy, implying a relatively low cost of giving up monetary autonomy.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0261560611001884
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Money and Finance.

    Volume (Year): 31 (2012)
    Issue (Month): 2 ()
    Pages: 412-427

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    Handle: RePEc:eee:jimfin:v:31:y:2012:i:2:p:412-427

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    Web page: http://www.elsevier.com/locate/inca/30443

    Related research

    Keywords: Bank foreign liabilities; Monetary policy; Monetary cooperation; Liability dollarization; East Asia;

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