NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Monetary Policy and Global Banking

Falk Brauning, Victoria Ivashina

NBER Working Paper No. 23316
Issued in April 2017, Revised in April 2020
NBER Program(s):Corporate Finance, International Finance and Macroeconomics

When central banks adjust interest rates, the opportunity cost of lending in local currency changes, but—in absence of frictions—there is no spillover effect to lending in other currencies. However, when equity capital is limited, global banks must benchmark domestic and foreign lending opportunities. We show that, in equilibrium, the marginal return on foreign lending is affected by the interest rate differential, with lower domestic rates leading to an increase in local lending, at the expense of a reduction in foreign lending. We test our prediction in the context of changes in interest rates in six major currency areas.

download in pdf format
   (729 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w23316

Users who downloaded this paper also downloaded* these:
Obstfeld w17641 The International Monetary System: Living with Asymmetry
Amador, Bianchi, Bocola, and Perri w23266 Exchange Rate Policies at the Zero Lower Bound
Anderson and Stulz w23317 Is Post-Crisis Bond Liquidity Lower?
Swanson w23311 Measuring the Effects of Federal Reserve Forward Guidance and Asset Purchases on Financial Markets
Beraja, Fuster, Hurst, and Vavra w23270 Regional Heterogeneity and Monetary Policy
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us