The international transmission of monetary policy

Abstract

This paper presents the novel results from an internationally coordinated project by the International Banking Research Network (IBRN) on the cross-border transmission of conventional and unconventional monetary policy through banks. Teams from seventeen countries use confidential micro-banking data for the years 2000 through 2015 to explore the international transmission of monetary policies of the U.S., euro area, Japan, and United Kingdom. Two other studies use international data with different degrees of granularity. International spillovers into lending to the private sector do occur, especially for U.S. policies, and bank-specific heterogeneity influences the magnitudes of transmission. The effects are supportive of the international bank lending channel and the portfolio channel of monetary policy transmission. They also show that the frictions that banks face matter; in particular, foreign currency funding and hedging considerations can be a key source of heterogeneity. The forms of bank balance sheet heterogeneity that differentiate spillovers across banks are not uniform across countries. International spillovers into lending can be large for some banks, even while the average international spillovers of policies into nonbank lending generally are not large.

Financial institutions’ business models and the global transmission of monetary policy

“…The main focus of the empirical strategy is to identify the effect of monetary policy on financial institutions' foreign claims-cross-border and, separately, local claims-conditional on their business models. The methodology is broadly based on the framework discussed in Buch et al (2018). First, we analyze how monetary policy affects banks that are headquartered in countries that are characterized by banking sectors operating diverse business models (the Netherlands, Spain, and the United States).…”

Financial market spillovers of U.S. monetary policy shocks

“…Financial globalization has strengthened the international transmission of monetary shocks in recent decades, particularly from the United States, a primary hub of the world financial system. This has attracted significant attention in literature and in policy discussions (Albagli et al, 2019;Buch et al, 2018;Iacoviello & Navarro, 2019;Rogers et al, 2018). 1 While it is still unclear whether financial integration offers gains through growth effects or better risk sharing, the cost of integration, in particular due to monetary spillovers, appears to have grown in recent decades (Albagli et al, 2019;Kose et al, 2009;Obstfeld, 2015).…”

Mortgage Lending, Monetary Policy, and Prudential Measures in Small Euro-Area Economies: Evidence from Ireland and the Netherlands

“…This regression approach is common in the empirical banking literature (e.g. Gambacorta and Marques-Ibanez, 2011;Buch et al, 2019).…”