A Global Lending Channel Unplugged? Does U.S. Monetary Policy Affect Cross-border and Affiliate Lending by Global U.S. Banks?

RePEc Short ID: pow7
ORCID iD: 0000-0001-6513-2491

Ongena, Steven; Owen, Ann L.; Temesvary, Judit

doi:10.17016/FEDS.2018.008

Working Paper

A Global Lending Channel Unplugged? Does U.S. Monetary Policy Affect Cross-border and Affiliate Lending by Global U.S. Banks?

Abstract: We examine how U.S. monetary policy affects the international activities of U.S. Banks. We access a rarely studied U.S. bank-level regulatory dataset to assess at a quarterly frequency how changes in the U.S. Federal funds rate (before the crisis) and quantitative easing (after the onset of the crisis) affects changes in cross-border claims by U.S. banks across countries, maturities and sectors, and also affects changes in claims by their foreign affiliates. We find robust evidence consistent with the existence of a potent global bank lending channel. In response to changes in U.S. monetary conditions, U.S. banks strongly adjust their cross-border claims in both the pre and post-crisis period. However, we also find that U.S. bank affiliate claims respond mainly to host country monetary conditions.

Keywords: Bank lending channel; Cross-country analysis; Global banking; Monetary transmission;

JEL Classification: E44; E52; F42; G15; G21;

https://doi.org/10.17016/FEDS.2018.008