IDEAS home Printed from https://ideas.repec.org/p/ptu/wpaper/w201815.html
   My bibliography  Save this paper

Cross-border spillovers of monetary policy: what changes during a financial crisis?

Author

Listed:
  • Diana Bonfim
  • Luciana Barbosa
  • Sónia Costa
  • Mary Everett

Abstract

This paper analyses cross-border spillovers of monetary policy by examining two countries that were in the eye of the storm during the euro area sovereign debt crisis, namely Ireland and Portugal. The research provides insight as to how banking and sovereign stress affect the inward transmission of foreign monetary policy to two economies that share many characteristics, but that also have many distinct features. In particular, our research addresses the question of whether a banking system in distress reacts more or less to monetary policy changes in other major economies. The empirical analysis indicates that international spillovers are present for US and UK monetary policy for both Ireland and Portugal, but there is heterogeneity in the transmission mechanisms by which they affect credit growth in the two economies.

Suggested Citation

  • Diana Bonfim & Luciana Barbosa & Sónia Costa & Mary Everett, 2018. "Cross-border spillovers of monetary policy: what changes during a financial crisis?," Working Papers w201815, Banco de Portugal, Economics and Research Department.
  • Handle: RePEc:ptu:wpaper:w201815
    as

    Download full text from publisher

    File URL: https://www.bportugal.pt/sites/default/files/anexos/papers/wp201815.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Buch, Claudia M. & Bussierè, Matthieu & Goldberg, Linda & Hills, Robert, 2019. "The international transmission of monetary policy," Journal of International Money and Finance, Elsevier, vol. 91(C), pages 29-48.
    2. Galina Hale & Maurice Obstfeld, 2016. "The Euro And The Geography Of International Debt Flows," Journal of the European Economic Association, European Economic Association, vol. 14(1), pages 115-144, February.
    3. Kashyap, Anil K. & Stein, Jeremy C., 1995. "The impact of monetary policy on bank balance sheets," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 42(1), pages 151-195, June.
    4. Ciccarelli, Matteo & Maddaloni, Angela & Peydró, José-Luis, 2013. "Heterogeneous transmission mechanism: monetary policy and financial fragility in the euro area," Working Paper Series 1527, European Central Bank.
    5. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2012. "External adjustment and the global crisis," Journal of International Economics, Elsevier, vol. 88(2), pages 252-265.
    6. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 27-48, Fall.
    7. Dias, Daniel A. & Robalo Marques, Carlos & Richmond, Christine, 2016. "Misallocation and productivity in the lead up to the Eurozone crisis," Journal of Macroeconomics, Elsevier, vol. 49(C), pages 46-70.
    8. Kalemli-Ozcan, Sebnem & Papaioannou, Elias & Peydró, José-Luis, 2010. "What lies beneath the euro's effect on financial integration? Currency risk, legal harmonization, or trade?," Journal of International Economics, Elsevier, vol. 81(1), pages 75-88, May.
    9. Pedro Barros & Diana Bonfim & Moshe Kim & Nuno Martins, 2014. "Counterfactual analysis of bank mergers," Empirical Economics, Springer, vol. 46(1), pages 361-391, February.
    10. Honohan, Patrick, 2006. "To What Extent has Finance been a Driver of Ireland's Economic Success?," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI), vol. 2006(4-Winter), pages 59-72.
    11. Carla Soares & Diana Bonfim & Nuno Alves, 2016. "Surviving the perfect storm: the role of the lender of last resort," Working Papers w201617, Banco de Portugal, Economics and Research Department.
    12. Olivier Blanchard & Pedro Portugal, 2017. "Boom, slump, sudden stops, recovery, and policy options. Portugal and the Euro," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 16(3), pages 149-168, December.
    13. Valentina Bruno & Hyun Song Shin, 2015. "Cross-Border Banking and Global Liquidity," Review of Economic Studies, Oxford University Press, vol. 82(2), pages 535-564.
    14. Nicola Cetorelli & Linda S. Goldberg, 2012. "Banking Globalization and Monetary Transmission," Journal of Finance, American Finance Association, vol. 67(5), pages 1811-1843, October.
    15. Ricardo Reis, 2013. "The Portugese Slump and Crash and the Euro Crisis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 44(1 (Spring), pages 143-210.
    16. Philip R. Lane, 2012. "The European Sovereign Debt Crisis," Journal of Economic Perspectives, American Economic Association, vol. 26(3), pages 49-68, Summer.
    17. Philip R. Lane & Peter McQuade, 2014. "Domestic Credit Growth and International Capital Flows," Scandinavian Journal of Economics, Wiley Blackwell, vol. 116(1), pages 218-252, January.
    18. Luciana Barbosa & Sónia Costa, 2010. "Determinants of sovereign bond yield spreads in the euro area in the context of the economic and financial crisis," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    19. Jonathan Kearns & Nikhil Patel, 2016. "Does the financial channel of exchange rates offset the trade channel?," BIS Quarterly Review, Bank for International Settlements, December.
    20. Mary Everett & Jane Kelly & Fergal Mccann, 2015. "International Banking and Liquidity Risk Transmission: Evidence from Ireland," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(3), pages 542-567, November.
    21. Matteo Ciccarelli & Angela Maddaloni & José-Luis Peydró, 2013. "Heterogeneous transmission mechanism: monetary policy and financial fragility in the eurozone," Economic Policy, CEPR;CES;MSH, vol. 28(75), pages 459-512, July.
    22. Jeremy C. Stein & Anil K. Kashyap, 2000. "What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?," American Economic Review, American Economic Association, vol. 90(3), pages 407-428, June.
    23. Coates, Dermot & Everett, Mary, 2013. "Profiling the Cross-Border Funding of the Irish Banking System," Economic Letters 04/EL/13, Central Bank of Ireland.
    24. Honohan, Patrick, 2009. "Resolving Ireland’s Banking Crisis," The Economic and Social Review, Economic and Social Studies, vol. 40(2), pages 207-231.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Buch, Claudia M. & Bussierè, Matthieu & Goldberg, Linda & Hills, Robert, 2019. "The international transmission of monetary policy," Journal of International Money and Finance, Elsevier, vol. 91(C), pages 29-48.
    2. repec:ptu:bdpart:e201909 is not listed on IDEAS
    3. repec:rfe:zbefri:v:37:y:2019:i:1:p:55-75 is not listed on IDEAS

    More about this item

    JEL classification:

    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ptu:wpaper:w201815. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (DEE-NTD). General contact details of provider: http://edirc.repec.org/data/bdpgvpt.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.