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

Author

Listed:
  • Steven Ongena

    (University of Lousanne)

  • Ibolya Schindele

    () (Magyar Nemzeti Bank (Central Bank of Hungary))

  • Dzsamila Vonnák

    (Magyar Nemzeti Bank (Central Bank of Hungary))

Abstract

We study the impact of monetary policy on the supply of bank credit when bank lending is also 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, 2017. "In Lands of Foreign Currency Credit, Bank Lending Channels Run Through?," MNB Working Papers 2017/6, Magyar Nemzeti Bank (Central Bank of Hungary).
  • Handle: RePEc:mnb:wpaper:2017/6
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    File URL: http://www.mnb.hu/letoltes/mnb-wp-2017-6-final.pdf
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    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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