for useful comments and suggestions, Bat-el Berger for excellent assistance with the BIS IBS data, and Rosa Lim for excellent research assistance. We are grateful to seminar participants at the NBER Summer Institute 2017, CEPII, and the BIS. All errors are our own. This work was partly funded by the World Bank's Knowledge for Change and Strategic Research programs. The views expressed here are ours only and do not necessarily reflect those of the institutions that the authors are affiliated with or the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
for useful comments and suggestions, Bat-el Berger for excellent assistance with the BIS IBS data, and Rosa Lim for excellent research assistance. We are grateful to seminar participants at the NBER Summer Institute 2017, CEPII, and the BIS. All errors are our own. This work was partly funded by the World Bank's Knowledge for Change and Strategic Research programs. The views expressed here are ours only and do not necessarily reflect those of the institutions that the authors are affiliated with or the National Bureau of Economic Research.NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
Prudential regulation of banks is multi‐layered: policy changes by home‐country authorities affect banks’ global operations across many jurisdictions; policy changes by host‐country authorities shape banks’ operations in the host jurisdiction regardless of the nationality of the parent bank. Do these policies create (unintended) cross‐border spillovers? Similarly, monetary policy actions by major central banks may also have effects on the behaviour of banks in other countries. This paper examines the effect that changes in home‐ and host‐country prudential measures have on cross‐border dollar credit provision, and how these interact with US monetary policy. We first run panel regressions with both layers of regulation, to examine which has a greater effect on cross‐border lending. We then use a novel approach to decompose growth in cross‐border bank lending into separate home, host and common components, and then match each with the corresponding home or host policies. Our results suggest that prudential policies can have spillover effects, which depend on the instrument used and on whether a bank's home or host country implemented them. Home policies tend to have larger spillovers on cross‐border US dollar lending than host policies. We also find that a tightening of US monetary policy can compound the spillovers of some prudential measures.
BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS.This publication is available on the BIS website (www.bis.org).
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