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FOREIGN BANKS AND THE BANK LENDING CHANNEL
Author(s) -
Denderski Piotr,
Paczos Wojtek
Publication year - 2021
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12942
Subject(s) - monetary policy , economics , monetary economics , monetary base , bank rate , financial system , chinese financial system , channel (broadcasting) , business , central bank , international economics , political science , electrical engineering , china , law , engineering
We provide new evidence on bank ownership and transmission of monetary policy using bank‐level data on 453 banks in Central and Eastern European economies between 1998 and 2012. Only domestic banks adjust loans to changes in monetary policy, while foreign banks do not. Conventional wisdom says that this is because foreign banks can rely on parent banks' funding to insulate against monetary policy shocks. In this paper we document an alternative explanation. Deposits in foreign banks do not react to monetary policy, hence the bank lending channel is only triggered in domestic banks. ( JEL E50, F36, G21)