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Spillovers of the United States’ Unconventional Monetary Policy to Emerging Asia: The Bank Lending Channel

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  • Ying Xu
  • Hai Anh La

Abstract

This article assesses the spillover effects of the United States’ unconventional monetary policy (i.e., quantitative easing programs adopted during 2008–2014) on the Asian credit market. Focusing on cross-border bank lending, we employed firm-level loan data with regard to the syndicated loan market and measured the international bank lending channel through changes in the United States dollar-denominated loans extended to Asian borrowers. We found that the growth of dollar credit in Asia increased substantially in response to the quantitative easing in the US financial market. The results of this study confirm the existence of the bank lending channel in Asia and emphasize the role of credit flows in transmitting financial conditions. The article also provides new evidence of cross-border liquidity spillover in the syndicated loan market. We found that the overall spillover effect was large but differed significantly in Asia by types of borrowing firms, financing purposes, and loan terms at different stages of the quantitative easing programs.

Suggested Citation

  • Ying Xu & Hai Anh La, 2017. "Spillovers of the United States’ Unconventional Monetary Policy to Emerging Asia: The Bank Lending Channel," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(12), pages 2744-2769, December.
    • Handle: RePEc:mes:emfitr:v:53:y:2017:i:12:p:2744-2769
    DOI: 10.1080/1540496X.2017.1365287
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    3. Lakdawala, Aeimit & Moreland, Timothy & Schaffer, Matthew, 2021. "The international spillover effects of US monetary policy uncertainty," Journal of International Economics, Elsevier, vol. 133(C).
    4. Dedola, Luca & Georgiadis, Georgios & Gräb, Johannes & Mehl, Arnaud, 2021. "Does a big bazooka matter? Quantitative easing policies and exchange rates," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 489-506.
    5. Naib ALAKBAROV & Yılmaz BAYAR, 2021. "International Financial Market Integration and The Feldstein–Horioka Puzzle: Evidence from Emerging Market Economies," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 143-165, December.
    6. Liew, Ping-Xin & Lim, Kian-Ping & Goh, Kim-Leng, 2022. "The dynamics and determinants of liquidity connectedness across financial asset markets," International Review of Economics & Finance, Elsevier, vol. 77(C), pages 341-358.
    7. Horvath, Jaroslav & Zhong, Jiansheng, 2019. "Unemployment dynamics in emerging countries: Monetary policy and external shocks," Economic Modelling, Elsevier, vol. 76(C), pages 31-49.
    8. Miguel Sarmiento, 2022. "Sudden Yield Reversals and Financial Intermediation in Emerging Markets," Borradores de Economia 1210, Banco de la Republica de Colombia.
    9. Jung Park, Yuen & Kutan, Ali M. & Ryu, Doojin, 2019. "The impacts of overseas market shocks on the CDS-option basis," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 622-636.
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    11. Demirer, Riza & Omay, Tolga & Yuksel, Asli & Yuksel, Aydin, 2018. "Global risk aversion and emerging market return comovements," Economics Letters, Elsevier, vol. 173(C), pages 118-121.
    12. Zhang, Dayong & Lei, Lei & Ji, Qiang & Kutan, Ali M., 2019. "Economic policy uncertainty in the US and China and their impact on the global markets," Economic Modelling, Elsevier, vol. 79(C), pages 47-56.

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    More about this item

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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