International bank lending channel of monetary policy

Silvia Albrizio, Sangyup Choi, Davide Furceri, Chansik Yoon

Research output: Contribution to journalArticle


How does domestic monetary policy in systemic countries spillover to the rest of the world? This paper examines the transmission channel of domestic monetary policy in the cross-border context. We use exogenous shocks to monetary policy in systemically important economies, including the U.S., and local projections to estimate the dynamic effect of monetary policy shocks on bilateral cross-border bank lending. We find robust evidence that an increase in funding costs following an exogenous monetary tightening leads to a statistically and economically significant decline in cross-border bank lending. The effect is weakened during periods of high uncertainty. In contrast, the effect is found to not vary according to the degree of borrower country riskiness, further weakening support for the international portfolio rebalancing channel.

Original languageEnglish
Article number102124
JournalJournal of International Money and Finance
Publication statusPublished - 2020 Apr

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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