Foreign Banks and International Transmission of Monetary Policy : Evidence from the Syndicated Loan Market
This paper uses loan-level data from 124 countries over 1995–2015 to examine the transmission of monetary policy through the cross-border syndicated loan market. The results show that the expansion of monetary policy increases cross-border credit s...
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World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/190371483993294665/Foreign-banks-and-international-transmission-of-monetary-policy-evidence-from-the-syndicated-loan-market http://hdl.handle.net/10986/25946 |
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okr-10986-259462021-06-08T14:42:47Z Foreign Banks and International Transmission of Monetary Policy : Evidence from the Syndicated Loan Market Demirguc-Kunt, Asli Horvath, Balint L. Huizinga, Harry cross-border lending monetary transmission banking FDI bank regulation capital controls monetary policy syndicated loans This paper uses loan-level data from 124 countries over 1995–2015 to examine the transmission of monetary policy through the cross-border syndicated loan market. The results show that the expansion of monetary policy increases cross-border credit supply especially to weaker firms. However, greater foreign bank presence in the borrower country appears to reduce the potentially destabilizing impact of lower policy interest rates on cross-border lending, as it attenuates increases in loan volume and maturity while magnifying increases in collateralization and covenant use. The mitigating effect of foreign banking presence in the borrowing country on the transmission of monetary policy is robust to controlling for borrower-country economic and financial development, and a range of borrower and lender country policies and institutions, including the strength of bank regulation and supervision, exchange rate flexibility, and restrictions on capital flows. The findings qualify the characterization of international banks as sources of credit instability, and suggest that foreign bank entry can improve the stability of cross-border credit in the face of international monetary policy shocks. 2017-01-30T17:32:50Z 2017-01-30T17:32:50Z 2017-01 Working Paper http://documents.worldbank.org/curated/en/190371483993294665/Foreign-banks-and-international-transmission-of-monetary-policy-evidence-from-the-syndicated-loan-market http://hdl.handle.net/10986/25946 English en_US Policy Research Working Paper;No. 7937 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
cross-border lending monetary transmission banking FDI bank regulation capital controls monetary policy syndicated loans |
| spellingShingle |
cross-border lending monetary transmission banking FDI bank regulation capital controls monetary policy syndicated loans Demirguc-Kunt, Asli Horvath, Balint L. Huizinga, Harry Foreign Banks and International Transmission of Monetary Policy : Evidence from the Syndicated Loan Market |
| relation |
Policy Research Working Paper;No. 7937 |
| description |
This paper uses loan-level data from 124
countries over 1995–2015 to examine the transmission of
monetary policy through the cross-border syndicated loan
market. The results show that the expansion of monetary
policy increases cross-border credit supply especially to
weaker firms. However, greater foreign bank presence in the
borrower country appears to reduce the potentially
destabilizing impact of lower policy interest rates on
cross-border lending, as it attenuates increases in loan
volume and maturity while magnifying increases in
collateralization and covenant use. The mitigating effect of
foreign banking presence in the borrowing country on the
transmission of monetary policy is robust to controlling for
borrower-country economic and financial development, and a
range of borrower and lender country policies and
institutions, including the strength of bank regulation and
supervision, exchange rate flexibility, and restrictions on
capital flows. The findings qualify the characterization of
international banks as sources of credit instability, and
suggest that foreign bank entry can improve the stability of
cross-border credit in the face of international monetary
policy shocks. |
| format |
Working Paper |
| author |
Demirguc-Kunt, Asli Horvath, Balint L. Huizinga, Harry |
| author_facet |
Demirguc-Kunt, Asli Horvath, Balint L. Huizinga, Harry |
| author_sort |
Demirguc-Kunt, Asli |
| title |
Foreign Banks and International Transmission of Monetary Policy : Evidence from the Syndicated Loan Market |
| title_short |
Foreign Banks and International Transmission of Monetary Policy : Evidence from the Syndicated Loan Market |
| title_full |
Foreign Banks and International Transmission of Monetary Policy : Evidence from the Syndicated Loan Market |
| title_fullStr |
Foreign Banks and International Transmission of Monetary Policy : Evidence from the Syndicated Loan Market |
| title_full_unstemmed |
Foreign Banks and International Transmission of Monetary Policy : Evidence from the Syndicated Loan Market |
| title_sort |
foreign banks and international transmission of monetary policy : evidence from the syndicated loan market |
| publisher |
World Bank, Washington, DC |
| publishDate |
2017 |
| url |
http://documents.worldbank.org/curated/en/190371483993294665/Foreign-banks-and-international-transmission-of-monetary-policy-evidence-from-the-syndicated-loan-market http://hdl.handle.net/10986/25946 |
| _version_ |
1764460555088691200 |