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The Transmission Of Foreign Monetary Policy Shocks Into The United States Through Foreign Banks
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Book Synopsis The Transmission of Foreign Monetary Policy Shocks Into the United States Through Foreign Banks by : Judit Temesvary
Download or read book The Transmission of Foreign Monetary Policy Shocks Into the United States Through Foreign Banks written by Judit Temesvary and published by . This book was released on 2017 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies how the lending of all foreign banks (branches and subsidiaries) in the US responds to foreign monetary policy actions in their parents' home countries. Using a bank-level dataset over the 1997-2014 period, results show strong evidence of inward monetary transmission. In response to home country monetary tightening, (1) branches (with close ties to their foreign parent) reduce lending more than US-chartered subsidiaries of foreign banks, and (2) within each bank type, funding-constrained banks cut lending more than those with ample funding access. Home country monetary tightening induces internal capital outflows from foreign banks in the US, which further amplify the negative lending effects. This suggests a substitution pattern between internal capital flows and access to funding from US sources in mitigating foreign monetary shocks. Inward transmission is strongest for the pre-crisis period, and for foreign banks originating from Europe.
Book Synopsis Global Banks and International Shock Transmission by : Nicola Cetorelli
Download or read book Global Banks and International Shock Transmission written by Nicola Cetorelli and published by DIANE Publishing. This book was released on 2010-11 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: Global banks played a significant role in transmitting the 2007-09 financial crisis to emerging-market (EM) economies. The authors examine adverse liquidity shocks on main developed-country banking systems and their relationships to EM across Europe, Asia, and Latin Amer., isolating loan supply from loan demand effects. Loan supply in EM across Europe, Asia, and Latin Amer. was affected significantly through three separate channels: (1) a contraction in direct, cross-border lending by foreign banks; (2) a contraction in local lending by foreign banks¿ affiliates in EM; and (3) a contraction in loan supply by domestic banks, resulting from the funding shock to their balance sheets induced by the decline in interbank, cross-border lending. Charts and tables.
Book Synopsis Monetary Policy Transmission in Emerging Markets and Developing Economies by : Mr.Luis Brandao-Marques
Download or read book Monetary Policy Transmission in Emerging Markets and Developing Economies written by Mr.Luis Brandao-Marques and published by International Monetary Fund. This book was released on 2020-02-21 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: Central banks in emerging and developing economies (EMDEs) have been modernizing their monetary policy frameworks, often moving toward inflation targeting (IT). However, questions regarding the strength of monetary policy transmission from interest rates to inflation and output have often stalled progress. We conduct a novel empirical analysis using Jordà’s (2005) approach for 40 EMDEs to shed a light on monetary transmission in these countries. We find that interest rate hikes reduce output growth and inflation, once we explicitly account for the behavior of the exchange rate. Having a modern monetary policy framework—adopting IT and independent and transparent central banks—matters more for monetary transmission than financial development.
Book Synopsis U.S. Monetary Policy Shock Spillovers: Evidence from Firm-Level Data by : Ms. Elif C Arbatli Saxegaard
Download or read book U.S. Monetary Policy Shock Spillovers: Evidence from Firm-Level Data written by Ms. Elif C Arbatli Saxegaard and published by International Monetary Fund. This book was released on 2022-09-16 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine three main channels through which U.S. monetary policy shocks affect firm investment in foreign countries: (1) the balance sheet channel; (2) the financial channel of the exchange rate; and (3) the trade channel. For this purpose, we use quarterly firm-level data for 63 advanced economies (AEs) and emerging market and developing economies (EMDEs) over 1996-2016. Our results suggest an important and independent role for all three key channels. U.S. monetary policy shocks have larger effects on investment for firms that are more leveraged (balance sheet channel), for firms that have a higher share of debt in foreign currency (financial channel of the exchange rate), and for firms that operate in sectors with higher export dependence (trade channel). Back-of-the-envelope calculations suggest that the balance sheet channel is the most important channel of transmission of U.S. monetary policy shocks on aggregate firm investment.
Book Synopsis International Dimensions of Monetary Policy by : Jordi Galí
Download or read book International Dimensions of Monetary Policy written by Jordi Galí and published by University of Chicago Press. This book was released on 2010-03-15 with total page 663 pages. Available in PDF, EPUB and Kindle. Book excerpt: United States monetary policy has traditionally been modeled under the assumption that the domestic economy is immune to international factors and exogenous shocks. Such an assumption is increasingly unrealistic in the age of integrated capital markets, tightened links between national economies, and reduced trading costs. International Dimensions of Monetary Policy brings together fresh research to address the repercussions of the continuing evolution toward globalization for the conduct of monetary policy. In this comprehensive book, the authors examine the real and potential effects of increased openness and exposure to international economic dynamics from a variety of perspectives. Their findings reveal that central banks continue to influence decisively domestic economic outcomes—even inflation—suggesting that international factors may have a limited role in national performance. International Dimensions of Monetary Policy will lead the way in analyzing monetary policy measures in complex economies.
Book Synopsis Bank Leverage and Monetary Policy's Risk-Taking Channel by : Mr.Giovanni Dell'Ariccia
Download or read book Bank Leverage and Monetary Policy's Risk-Taking Channel written by Mr.Giovanni Dell'Ariccia and published by International Monetary Fund. This book was released on 2013-06-06 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: We present evidence of a risk-taking channel of monetary policy for the U.S. banking system. We use confidential data on the internal ratings of U.S. banks on loans to businesses over the period 1997 to 2011 from the Federal Reserve’s survey of terms of business lending. We find that ex-ante risk taking by banks (as measured by the risk rating of the bank’s loan portfolio) is negatively associated with increases in short-term policy interest rates. This relationship is less pronounced for banks with relatively low capital or during periods when banks’ capital erodes, such as episodes of financial and economic distress. These results contribute to the ongoing debate on the role of monetary policy in financial stability and suggest that monetary policy has a bearing on the riskiness of banks and financial stability more generally.
Book Synopsis International Bank Lending Channel of Monetary Policy by : Silvia Albrizio
Download or read book International Bank Lending Channel of Monetary Policy written by Silvia Albrizio and published by International Monetary Fund. This book was released on 2019-11-01 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: How does domestic monetary policy in systemic countries spillover to the rest of the world? This paper examines the transmission channel of domestic monetary policy in the cross-border context. We use exogenous shocks to monetary policy in systemically important economies, including the U.S., and local projections to estimate the dynamic effect of monetary policy shocks on bilateral cross-border bank lending. We find robust evidence that an increase in funding costs following an exogenous monetary tightening leads to a statistically and economically significant decline in cross-border bank lending. The effect is weakened during periods of high uncertainty. In contrast, the effect is found to not vary according to the degree of borrower country riskiness, further weakening support for the international portfolio rebalancing channel.
Book Synopsis The Federal Reserve System Purposes and Functions by : Board of Governors of the Federal Reserve System
Download or read book The Federal Reserve System Purposes and Functions written by Board of Governors of the Federal Reserve System and published by . This book was released on 2002 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Provides an in-depth overview of the Federal Reserve System, including information about monetary policy and the economy, the Federal Reserve in the international sphere, supervision and regulation, consumer and community affairs and services offered by Reserve Banks. Contains several appendixes, including a brief explanation of Federal Reserve regulations, a glossary of terms, and a list of additional publications.
Book Synopsis Dominant Currency Paradigm: A New Model for Small Open Economies by : Camila Casas
Download or read book Dominant Currency Paradigm: A New Model for Small Open Economies written by Camila Casas and published by International Monetary Fund. This book was released on 2017-11-22 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Most trade is invoiced in very few currencies. Despite this, the Mundell-Fleming benchmark and its variants focus on pricing in the producer’s currency or in local currency. We model instead a ‘dominant currency paradigm’ for small open economies characterized by three features: pricing in a dominant currency; pricing complementarities, and imported input use in production. Under this paradigm: (a) the terms-of-trade is stable; (b) dominant currency exchange rate pass-through into export and import prices is high regardless of destination or origin of goods; (c) exchange rate pass-through of non-dominant currencies is small; (d) expenditure switching occurs mostly via imports, driven by the dollar exchange rate while exports respond weakly, if at all; (e) strengthening of the dominant currency relative to non-dominant ones can negatively impact global trade; (f) optimal monetary policy targets deviations from the law of one price arising from dominant currency fluctuations, in addition to the inflation and output gap. Using data from Colombia we document strong support for the dominant currency paradigm.
Book Synopsis Global Transmission of Interest Rates by : Jeffrey A. Frankel
Download or read book Global Transmission of Interest Rates written by Jeffrey A. Frankel and published by World Bank Publications. This book was released on 2000 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Hikes in U.S. interest rates in 1999-2000 have started to spill over to other economies' interest rates, which in many countries have risen to reflect the higher U.S. rates. Are countries with flexible exchange rates better able to isolate their domestic interest rates from this type of negative international shock? Less and less so, as economies become more integrated.
Book Synopsis The Impact of Foreign Banks on Monetary Policy Transmission by : Bang Nam Jeon
Download or read book The Impact of Foreign Banks on Monetary Policy Transmission written by Bang Nam Jeon and published by . This book was released on 2015 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the impact of foreign banks on the monetary policy transmission mechanism in the Korean economy during the period from 2000 to 2012, with a specific focus on the lending behavior of banks with different types of ownership. The recent global financial crisis of 2008-2009 provides a case for the first significant test for evaluating the stabilizing/destabilizing role of foreign banks in an emerging Asian economy, Korea, after experiencing a steady increase in foreign ownership in its banking sector. Using the bank-level panel data of the banking system in Korea, we present consistent evidence on the buffering impact that the foreign banks on the effectiveness of the monetary policy transmission mechanism in Korea from the bank-lending channel perspective during the global financial crisis of 2008-2009. Our further analyses show that this buffering effect is mostly driven by foreign bank branches whose parent banks are located in the U.S. One of the underlying reasons for the buffering effect by foreign bank branches including U.S. bank branches is the existence of internal capital markets operated by multinational banks to overcome capital market frictions faced when the foreign banks finance their loans. Our findings suggest an important policy implication for policy-makers as well as banking regulators in Korea that, when the Bank of Korea conducts monetary policies -- expansionary or contractionary -- during crisis periods to bail them out from the credit crunch and spillover effects of financial shocks from abroad, it must take into account the buffering or hampering effects of foreign banks on the effectiveness of the monetary policy transmission mechanism.
Book Synopsis Banking Globalization, Monetary Transmission, and the Lending Channel by : Nicola Cetorelli
Download or read book Banking Globalization, Monetary Transmission, and the Lending Channel written by Nicola Cetorelli and published by . This book was released on 2010 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: The globalization of banking in the United States is influencing the monetary transmission mechanism both domestically and in foreign markets. Using quarterly information from all U.S. banks filing call reports between 1980 and 2005, we find evidence for the lending channel for monetary policy in large banks, but only those banks that are domestically-oriented and without international operations. We show that the large globally-oriented banks rely on internal capital markets with their foreign affiliates to help smooth domestic liquidity shocks. We also show that the existence of such internal capital markets contributes to an international propagation of domestic liquidity shocks to lending by affiliated banks abroad. While these results imply a substantially more active lending channel than documented in the seminal work of Kashyap and Stein (2000), the lending channel within the United States is declining in strength as banking becomes more globalized.
Book Synopsis International Capital Flows by : Martin Feldstein
Download or read book International Capital Flows written by Martin Feldstein and published by University of Chicago Press. This book was released on 2007-12-01 with total page 500 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent changes in technology, along with the opening up of many regions previously closed to investment, have led to explosive growth in the international movement of capital. Flows from foreign direct investment and debt and equity financing can bring countries substantial gains by augmenting local savings and by improving technology and incentives. Investing companies acquire market access, lower cost inputs, and opportunities for profitable introductions of production methods in the countries where they invest. But, as was underscored recently by the economic and financial crises in several Asian countries, capital flows can also bring risks. Although there is no simple explanation of the currency crisis in Asia, it is clear that fixed exchange rates and chronic deficits increased the likelihood of a breakdown. Similarly, during the 1970s, the United States and other industrial countries loaned OPEC surpluses to borrowers in Latin America. But when the U.S. Federal Reserve raised interest rates to control soaring inflation, the result was a widespread debt moratorium in Latin America as many countries throughout the region struggled to pay the high interest on their foreign loans. International Capital Flows contains recent work by eminent scholars and practitioners on the experience of capital flows to Latin America, Asia, and eastern Europe. These papers discuss the role of banks, equity markets, and foreign direct investment in international capital flows, and the risks that investors and others face with these transactions. By focusing on capital flows' productivity and determinants, and the policy issues they raise, this collection is a valuable resource for economists, policymakers, and financial market participants.
Book Synopsis Financial Globalization and the International Transmission of Interest Rate Shocks by : Xiaoli Wan
Download or read book Financial Globalization and the International Transmission of Interest Rate Shocks written by Xiaoli Wan and published by . This book was released on 2017 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper evaluates the spillovers from U.S. monetary policy to China's domestic interest rates over 1999-2016, focusing on the impacts of long-term interest rate and exchange rate regimes on the capacity of China to moderate external interest rate shocks. We find that China's central bank owns some extent of autonomy as it has a significant preference to control inflation and stimulate the economy even beyond the potential growth. However, China's interest rates are significantly impacted by U.S. monetary policy especially after the crisis. The transmission from U.S. interest rates to China at the long-end even exists before the crisis, but only for the positive change of U.S. interest rates. The comparison with New Zealand's experience provides some evidence that central banks are more likely facing a "monetary dilemma" and China's fixed exchange rate regime with capital controls might help to mitigate the spillovers of external monetary shocks in a turmoil period.
Book Synopsis Banking Globalization, Monetary Transmission and the Lending Channel by : Nicola Cetorelli
Download or read book Banking Globalization, Monetary Transmission and the Lending Channel written by Nicola Cetorelli and published by . This book was released on 2016 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: The globalization of banking in the United States is influencing the monetary transmission mechanism both domestically and in foreign markets. Using quarterly information from all U.S. banks filing call reports between 1980 and 2005, we find evidence for the lending channel for monetary policy in large banks, but only those banks that are domestically-oriented and without international operations. We show that the large globally-oriented banks rely on internal capital markets with their foreign affiliates to help smooth domestic liquidity shocks. We also show that the existence of such internal capital markets contributes to an international propagation of domestic liquidity shocks to lending by affiliated banks abroad. While these results imply a substantially more active lending channel than documented in the seminal work of Kashyap and Stein (2000), the lending channel within the United States is declining in strength as banking becomes more globalized.
Book Synopsis Monetary Transmission Mechanism in the East African Community by : Mr.Hamid Reza Davoodi
Download or read book Monetary Transmission Mechanism in the East African Community written by Mr.Hamid Reza Davoodi and published by International Monetary Fund. This book was released on 2013-02-06 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: Do changes in monetary policy affect inflation and output in the East African Community (EAC)? We find that (i) Monetary Transmission Mechanism (MTM) tends to be generally weak when using standard statistical inferences, but somewhat strong when using non-standard inference methods; (ii) when MTM is present, the precise transmission channels and their importance differ across countries; and (iii) reserve money and the policy rate, two frequently used instruments of monetary policy, sometimes move in directions that exert offsetting expansionary and contractionary effects on inflation—posing challenges to harmonization of monetary policies across the EAC and transition to a future East African Monetary Union. The paper offers some suggestions for strengthening the MTM in the EAC.
Book Synopsis International Macroeconomics in the Wake of the Global Financial Crisis by : Laurent Ferrara
Download or read book International Macroeconomics in the Wake of the Global Financial Crisis written by Laurent Ferrara and published by Springer. This book was released on 2018-06-13 with total page 300 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book collects selected articles addressing several currently debated issues in the field of international macroeconomics. They focus on the role of the central banks in the debate on how to come to terms with the long-term decline in productivity growth, insufficient aggregate demand, high economic uncertainty and growing inequalities following the global financial crisis. Central banks are of considerable importance in this debate since understanding the sluggishness of the recovery process as well as its implications for the natural interest rate are key to assessing output gaps and the monetary policy stance. The authors argue that a more dynamic domestic and external aggregate demand helps to raise the inflation rate, easing the constraint deriving from the zero lower bound and allowing monetary policy to depart from its current ultra-accommodative position. Beyond macroeconomic factors, the book also discusses a supportive financial environment as a precondition for the rebound of global economic activity, stressing that understanding capital flows is a prerequisite for economic-policy decisions.
