XXV Edition

1-2 December 2016"

What Determines the International Transmission of Monetary Policy through the Syndicated Loan Market?

Horvath Balint, University of Bristol
Huizinga Harry, Tilburg University
Demirguc-Kunt Asli, World Bank

This paper presents evidence that the transmission of monetary policy through the cross-border syndicated loan market depends on a range of borrower-country and lender-country policies and institutions. A foreign banking presence in the borrower country, specifically, is found to lead to relatively smaller increases in loan volume and maturity following a monetary policy rate decline, while the opposite holds for greater lender-country bank capital stringency. This suggests that foreign banking presence (lender-country capital stringency) mitigates (amplifies) the transmission of monetary policy towards cross-border loan volume and maturity.

Area: Monetary Policy and Central Banking

Keywords: Cross-border lending; Monetary transmission; Banking FDI; Bank regulation; Capital controls

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