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Journal of Finance Vol. 74 No. 1 2019

The International Bank Lending Channel of Monetary Policy Rates and QE: Credit Supply, Reach‐for‐Yield, and Real Effects

BERNARDO MORAIS1,2,3,4,5,6,7,8; José-Luis Peydró1,2,3,4,5,6,7,8; JESSICA ROLDÁN-PEÑA; Claudia Ruiz-Ortega9

1 Institució Catalana de Recerca i Estudis Avançats · 2 Center for Economic and Policy Research · 3 Federal Reserve · 4 SIL International · 5 Universitat Pompeu Fabra · 6 Vanderbilt University · 7 Barcelona School of Economics · 8 Banco de Portugal · 9 Bank of Mexico

Abstract

We identify the international credit channel by exploiting Mexican supervisory data sets and foreign monetary policy shocks in a country with a large presence of European and U.S. banks. A softening of foreign monetary policy expands credit supply of foreign banks (e.g., U.K. policy affects credit supply in Mexico via U.K. banks), inducing strong firm‐level real effects. Results support an international risk‐taking channel and spillovers of core countries’ monetary policies to emerging markets, both in the foreign monetary softening part (with higher credit and liquidity risk‐taking by foreign banks) and in the tightening part (with negative local firm‐level real effects).

DOI
10.1111/jofi.12735
Volume
74
Issue
1
Pages
55-90
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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