International spillovers of monetary policy: Evidence from France and Italy

Abstract

In this paper we provide empirical evidence on the impact of US and UK monetary policy changes on credit supply of banks operating in Italy and France over the period 2000-2015, exploring the existence of an international bank lending channel. Exploiting bank balance sheet heterogeneity, we find that monetary policy tightening abroad leads to a reduction of credit supply at home, in particular for US monetary policy changes. Our results show that USD funding plays an important role in the transmission mechanism, especially for French banks which rely to a larger extent on USD funding. We also show that banks adjust their euro and foreign currency lending differently, thus implying that funding sources in different currencies are not perfect substitutes. This is especially the case when tensions in currency swap markets are high, thus resulting in costly cross-currency funding.

The interaction between macroprudential and monetary policies: The cases of Norway and Sweden

“…Gajewski et al (2019) document the importance of bank lending in the transmission of foreign monetary policies for Chile, Korea, and Poland. The international bank lending channel has also been confirmed for Italy and France in Schmidt et al (2018). Argimon et al.…”

Monetary policy and herd behavior: International evidence

“…For instance, Curcuru and Kamin (2018) find that conventional Fed policies exert greater international spill-overs than unconventional policies (such as QE), Albagli et al (2018) show that US monetary policy spill-overs to long-term yields have increased substantially after the global financial crisis, while Yang and Zhou (2017) report a significant contribution of Fed unconventional policy to international volatility spill-overs. In addition, Schmidt et al (2018) provide evidence on the impact of US and UK monetary policy shocks on domestic credit supply of French and Italian banks; Georgiadis (2015) documents that US monetary policy generates sizable output spill-overs to the rest of the world; Hanisch (2018) shows that US monetary policy has a substantial impact on individual EA economic and financial stability, with financial sector represented by bond, stock and credit markets serving as an active transmission channel. In order to detect potential US monetary policy spill-over effects, we employ the same FAVAR model as above for the Eurozone sample markets, except that instead of using ECB policy we use Fed standard (FFR) and nonstandard (y*) monetary policy.…”

Analysis of the risk transmission mechanism of monetary policy in the monetary and financial service sectors from the perspective of asset-liability management

“…Previous studies on risk transmission mechanisms also showed that some monetary policies transmitted risks by expanding assets and deposits or stimulating aggregate demands through wealth channels. Another interesting perspective that has been explored by previous studies is the response of monetary and financial services companies to contrasts between monetary policy and regulatory expectations, and that the specific risk transmission is dependent on the heterogeneity across assets and liabilities, market concentration, enterprise size, liquidity, and leverage ratio [4][5][6][7][8][9][10][11][12][13][14].…”