We examine the transmission of international monetary policy shocks via the bank lending channel. Exploiting a panel of regulatory data on foreign banks operating in Australia, we show that the supply of credit is vulnerable to the international pass-through of monetary policy, with banks headquartered in Asia demonstrating high elasticity. Household and non-financial corporate loans are the most susceptible channels to policy shocks, while higher-margin lending, non-lending assets, and reservable liabilities are insensitive. We demonstrate that although banks curtail lending in the face of tighter monetary policy, they increase their non-reservable borrowing, suggesting an increased reliance on capital markets. Finally, we show that unconventional monetary policies have a muted effect compared to traditional measures. • We study the transmission of monetary policy shocks via the bank lending channel. • We exploit Australian regulatory bank data to test for the presence of the BLC. • Household and corporate loans are found to be the most susceptible channels. • Asian banks demonstrate the highest degree of lending elasticity. • Unconventional policies have a muted effect compared to traditional measures.

This paper develops tests of inequality restrictions implied by conditional asset pricing models. The methodology is easy to implement, requires little knowledge of the conditional distribution of asset returns, and is valid under fairly weak assumptions. As an application, we test whether the ex ante risk premium is always positive. We report reliable evidence that the ex ante risk premium is negative in some states of the world; these states are related to periods of high expected inflation and especially to downward-sloping term structures.

Regulation Fair Disclosure (FD), imposed by the Securities and Exchange Commission in October 2000, was designed to prohibit disclosure of material private information to selected market participants. The informational advantage such select participants gain is unclear. If multiple “insiders” receive identical information, private information is immediately incorporated in price and each insider has zero expected profit. If, on the other hand, Regulation FD has curtailed the flow of information from firms, private information becomes longer‐lived and more valuable. Hence, market makers will demand increased compensation by widening the adverse selection component of the bid‐ask spread. We identify the cost components of the bid‐ask spread for a sample of NASDAQ stocks surrounding the implementation of Regulation FD. Controlling for other factors affecting the spread, we find that adverse selection costs increase approximately 36% after Regulation FD. We interpret our finding as Regulation FD failing to achieve one of its desired objectives.