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The transmission of foreign monetary policy shocks into the United States through foreign banks

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  • Temesvary, Judit

Abstract

This paper examines how the lending of all foreign banks (branches and subsidiaries) in the US responds to foreign monetary policy actions in their parents’ home countries. Using a rarely studied bank-level dataset covering US-based foreign bank offices over the 1997–2014 period, I find strong evidence of a bank lending channel of inward monetary policy transmission: In response to home country monetary tightening, foreign banks with less access to liquid funds reduce their business lending in the US substantially more than foreign banks with more funding access. This inward transmission is strongest for the pre-crisis period, and for foreign banks originating from Europe.

Suggested Citation

  • Temesvary, Judit, 2018. "The transmission of foreign monetary policy shocks into the United States through foreign banks," Journal of Financial Stability, Elsevier, vol. 39(C), pages 104-124.
    • Handle: RePEc:eee:finsta:v:39:y:2018:i:c:p:104-124
    DOI: 10.1016/j.jfs.2018.09.003
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    References listed on IDEAS

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    1. Temesvary, Judit & Ongena, Steven & Owen, Ann L., 2018. "A global lending channel unplugged? Does U.S. monetary policy affect cross-border and affiliate lending by global U.S. banks?," Journal of International Economics, Elsevier, vol. 112(C), pages 50-69.
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    Cited by:

    1. Piotr Denderski & Wojtek Paczos, 2021. "Foreign Banks And The Bank Lending Channel," Economic Inquiry, Western Economic Association International, vol. 59(1), pages 478-493, January.
    2. Takáts, Előd & Temesvary, Judit, 2020. "The currency dimension of the bank lending channel in international monetary transmission," Journal of International Economics, Elsevier, vol. 125(C).

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    More about this item

    Keywords

    Bank lending channel; Monetary policy; Foreign banks; Cross-border capital transfers;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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