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In Lands of Foreign Currency Credit, Bank Lending Channels Run Through? The Effects of Monetary Policy at Home and Abroad on the Currency Denomination of the Supply of Credit

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  • Steven Ongena

    () (University of Zurich, Swiss Finance Institute and CEPR)

  • Ibolya Schindele

    () (BI Norwegian Business School and Central Bank of Hungary)

  • Dzsamila Vonnak

    () (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences)

Abstract

We analyze the differential impact of domestic and foreign monetary policy on the local supply of bank credit in domestic and foreign currencies. We analyze a novel, supervisory dataset from Hungary that records all bank lending to firms including its currency denomination. Accounting for time-varying firm-specific heterogeneity in loan demand, we find that a lower domestic interest rate expands the supply of credit in the domestic but not in the foreign currency. A lower foreign interest rate on the other hand expands lending by lowly versus highly capitalized banks relatively more in the foreign than in the domestic currency.

Suggested Citation

  • Steven Ongena & Ibolya Schindele & Dzsamila Vonnak, 2014. "In Lands of Foreign Currency Credit, Bank Lending Channels Run Through? The Effects of Monetary Policy at Home and Abroad on the Currency Denomination of the Supply of Credit," IEHAS Discussion Papers 1424, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  • Handle: RePEc:has:discpr:1424
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    Cited by:

    1. Kátay, Gábor & Péter, Harasztosi, 2017. "Currency Matching and Carry Trade by Non-Financial Corporations," Working Papers 2017-02, Joint Research Centre, European Commission (Ispra site).
    2. Banai, Ádám, 2016. "A banki hitelezést meghatározó tényezők - középpontban a bankok helyzete és a makrokörnyezet
      [Drivers of bank lending in Hungary - the roles of bank-specific and macro factors]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 137-161.

    More about this item

    Keywords

    bank balance-sheet channel; monetary policy; foreign currency lending;

    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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