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In Lands of Foreign Currency Credit, Bank Lending Channels Run Through?

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  • Steven Ongena

    (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR))

  • Ibolya Schindele

    (BI Norwegian Business School; Central Bank of Hungary)

  • Dzsamila Vonnák

    (Hungarian Academy of Sciences (HAS) - Institute of Economics CERS-HAS (IEHAS))

Abstract

We study the impact of monetary policy on the supply of bank credit when bank lending is denominated in foreign currencies. Accessing a comprehensive supervisory dataset from Hungary, we find that the supply of bank credit in a foreign currency is less sensitive to changes in domestic monetary conditions than the equivalent supply in the domestic currency. Changes in foreign monetary conditions similarly affect bank lending more in the foreign than in the domestic currency. Hence when banks lend in multiple currencies the domestic bank lending channel is weakened and international bank lending channels become operational.

Suggested Citation

  • Steven Ongena & Ibolya Schindele & Dzsamila Vonnák, 2020. "In Lands of Foreign Currency Credit, Bank Lending Channels Run Through?," Swiss Finance Institute Research Paper Series 20-104, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp20104
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    More about this item

    Keywords

    bank balance-sheet channel; monetary policy; foreign currency lending;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F3 - International Economics - - International Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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