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U.S. monetary policy shocks and bank lending in Latin America: evidence of an international bank lending channel

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  • Carlos Giraldo
  • Iader Giraldo
  • Jose Gomez-Gonzalez
  • Jorge Uribe

Abstract

We examine the impact of U.S. monetary policy shocks on bank lending in five major Latin American countries where large U.S. banks have limited presence. Our analysis covers annual balance sheet data from 2000 to 2021 for all banks in these nations, utilizing a recently developed measure of U.S. monetary policy shocks by Bu et al. Our findings reveal the existence of an international bank lending channel, with a one-percentage-point increase in the Fed funds rate resulting in an average 80.6 basis-point reduction in domestic bank loan growth in these countries. Liquidity and solvency emerge as crucial factors driving variations in lending behaviour among Latin American banks, with banks exhibiting stronger liquidity and solvency profiles experiencing higher loan supply growth rates.

Suggested Citation

  • Carlos Giraldo & Iader Giraldo & Jose Gomez-Gonzalez & Jorge Uribe, 2025. "U.S. monetary policy shocks and bank lending in Latin America: evidence of an international bank lending channel," Applied Economics Letters, Taylor & Francis Journals, vol. 32(13), pages 1946-1950, July.
    • Handle: RePEc:taf:apeclt:v:32:y:2025:i:13:p:1946-1950
    DOI: 10.1080/13504851.2024.2331672
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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