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Quantitative easing, global banks and the international bank lending channel

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  • D'Avino, Carmela

Abstract

The current debate on the international transmission of shocks generated by quantitative easing (QE) programmes mainly focuses on the impact on financial markets' yields and returns. This paper adds to the literature by investigating the existence of an international bank lending channel activated by QE, focusing on the behaviour of US global banks. In particular, the empirical analysis explores the impact of the Federal Reserves' QE policy on lending by foreign branches of US banks. The findings reveal significant policy-induced liquidity spillovers via foreign lending during the QE policy implementation in the US, suggesting the existence of an international bank lending channel. The channel worked its way through different segments of the credit markets, having asymmetric effects on foreign host countries. Overall, our findings highlight the role of global banks in channelling QE-created liquidity across borders, adding pressure to increasing debt levels in foreign countries.

Suggested Citation

  • D'Avino, Carmela, 2018. "Quantitative easing, global banks and the international bank lending channel," Economic Modelling, Elsevier, vol. 71(C), pages 234-246.
  • Handle: RePEc:eee:ecmode:v:71:y:2018:i:c:p:234-246
    DOI: 10.1016/j.econmod.2017.12.015
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    More about this item

    Keywords

    Quantitative easing; Global banks; International shocks transmission;

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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