Home sweet host: A cross‐country perspective on prudential and monetary policy spillovers through global banks

Avdjiev, Stefan; Hardy, Bryan; McGuire, Patrick; Peter, Goetz von

doi:10.1111/roie.12504

Cited by 16 publications

(19 citation statements)

References 13 publications

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“…The final paper, from the BIS (Avdjiev et al, 2020), complements the other papers by taking a crosscountry perspective to examine the role of home and host factors in explaining prudential and monetary policy spillovers through global banks. The authors use the BIS International Banking Statistics, which capture banks' aggregate cross-border claims and develop a new methodology to run a "horserace" between home and host factors.…”

Section: Resultsmentioning

confidence: 99%

“…Comparing the relative efficacy of policy action taken by core and recipient countries, there is tentative evidence that core countries' prudential policies tend to have greater spillover effects than those taken by recipient countries, when interacted with core country monetary policy. The BIS paper (Avdjiev et al, 2020) finds that tightening concentration limits, LTV caps, and local currency reserve requirements tends to boost cross-border dollar lending, while tightening interbank exposure limits and foreign currency reserve requirements have contractionary effects. On the recipient country side, tightening concentration limits and interbank exposure limits has a positive impact on cross-border bank lending, whereas tightening LTV caps has a negative effect.…”

Section: Discussionmentioning

confidence: 99%

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The Interaction Between Macroprudential Policy and Monetary Policy: Overview

et al. 2020

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This paper presents the main findings of an International Banking Research Network initiative examining the interaction between monetary policy and macroprudential policy in determining international bank lending. We give an overview on the data, empirical specifications and results of the seven papers from the initiative. The papers are from a range of core and smaller advanced economies, and emerging markets. The main findings are as follows. First, there is evidence that macroprudential policy in recipient countries can partly offset the spillover effects of monetary policy conducted in core countries. Meanwhile, domestic macroprudential policy in core countries can also affect the cross-border transmission of domestic monetary policy via lending abroad, by limiting the increase in lending by less strongly capitalised banks. Second, the findings highlight that studying heterogeneities across banks provides complementary insights to studies using more aggregate data and focusing on average effects. In particular, we find that individual bank characteristics such as bank size or G-SIB status play a first-order role in the transmission of these policies. Finally, the impacts differ considerably across prudential policy instruments, which also suggests the importance of more granular analysis.

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Section: Resultsmentioning

confidence: 99%

Section: Discussionmentioning

confidence: 99%

The Interaction Between Macroprudential Policy and Monetary Policy: Overview

et al. 2020

View full text Add to dashboard Cite

show abstract

“…The final paper, from the BIS (Avdjiev et al, 2020), complements the other papers by taking a cross‐country perspective to examine the role of home and host factors in explaining prudential and monetary policy spillovers through global banks. The authors use the BIS International Banking Statistics, which capture banks’ aggregate cross‐border claims and develop a new methodology to run a “horserace” between home and host factors.…”

Section: Resultsmentioning

confidence: 99%

“…Comparing the relative efficacy of policy action taken by core and recipient countries, there is tentative evidence that core countries’ prudential policies tend to have greater spillover effects than those taken by recipient countries, when interacted with core country monetary policy. The BIS paper (Avdjiev et al., 2020) finds that tightening concentration limits, LTV caps, and local currency reserve requirements tends to boost cross‐border dollar lending, while tightening interbank exposure limits and foreign currency reserve requirements have contractionary effects. On the recipient country side, tightening concentration limits and interbank exposure limits has a positive impact on cross‐border bank lending, whereas tightening LTV caps has a negative effect.…”

Section: Discussionmentioning

confidence: 99%

The interaction between macroprudential policy and monetary policy: Overview

Bussière

Cao²,

Haan

et al. 2020

Rev International Economics

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This paper presents the main findings of an International Banking Research Network initiative examining the interaction between monetary policy and macroprudential policy in determining international bank lending. We give an overview on the data, empirical specifications and results of the seven papers from the initiative. The papers are from a range of core and smaller advanced economies, and emerging markets . The main findings are as follows. First, there is evidence that macroprudential policy in recipient countries can partly offset the spillover effects of monetary policy conducted in core countries. Meanwhile, domestic macroprudential policy in core countries can also affect the cross‐border transmission of domestic monetary policy via lending abroad, by limiting the increase in lending by less strongly capitalized banks. Second, the findings highlight that studying heterogeneities across banks provides complementary insights to studies using more aggregate data and focusing on average effects. In particular, we find that individual bank characteristics such as bank size or GSIB status play a first‐order role in the transmission of these policies. Finally, the impacts differ considerably across prudential policy instruments, which also suggests the importance of more granular analysis.

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“…Epure et al (2018) use credit registry data to study how domestic macroprudential policy interacts with international financial conditions to affect the domestic lending in Romania. Takáts and Temesvary (2019) and Avdjiev et al (2020) study the impact of macroprudential and monetary policy interactions on cross‐border lending. These studies emphasize that tighter macroprudential policy in the home country mitigates monetary policy spillovers, although these results do not necessarily translate to policy interactions affecting domestic credit.…”

Section: Introductionmentioning

confidence: 99%

Macroprudential policy and the inward transmission of monetary policy: The case of Chile, Mexico, and Russia

Bush

Gómez

Jara

et al. 2020

Rev International Economics

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This paper studies whether domestic macroprudential policy may attenuate the inward transmission of monetary policy shocks from the United States to domestic bank lending growth in three emerging market economies—Chile, Mexico, and Russia. Identification relies on banks’ heterogeneous exposure to prudential policies and the fact that foreign monetary policy shocks are exogenous from the perspective of these economies. After analyzing the effects of the aggregate domestic prudential policy stance, we focus on specific prudential policies targeting mortgage and consumer loans, as well as foreign‐currency deposits. Although our overall results are mixed, we find evidence that the strength of international monetary policy spillovers varies depending on the stance of domestic macroprudential policy. In particular, a tighter reserve requirement stance over foreign‐currency deposits in Chile dampens the effect of an international monetary policy shock on domestic local‐currency lending, but reinforces that on foreign‐currency lending, whereas in Russia, it dampens the effect on both local‐currency and foreign‐currency lending, although to different degrees. Prudential policies targeting the asset side of banks’ balance sheets, such as mortgage loans or consumer credit, are found to amplify international monetary policy spillovers in some cases and attenuate it in others, depending on the country context.

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Home sweet host: A cross‐country perspective on prudential and monetary policy spillovers through global banks

Cited by 16 publications

References 13 publications

The Interaction Between Macroprudential Policy and Monetary Policy: Overview

The Interaction Between Macroprudential Policy and Monetary Policy: Overview

The interaction between macroprudential policy and monetary policy: Overview

Macroprudential policy and the inward transmission of monetary policy: The case of Chile, Mexico, and Russia

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