Banking sector globalization and monetary policy transmission: Evidence from Asian countries. (May 2019)

• Record Type: Journal Article
• Authors: Lee, Seungyoon; Bowdler, Christopher
• Is Part Of: Journal of international money and finance. Volume 93(2019)
• Page Start: 101
• Page End: 116
• Publication Date: 2019-05
• Subjects: E44 -- E50 -- F34; Global banks -- Monetary policy transmission -- Bank lending channel -- Panel data; International finance -- Periodicals; Foreign exchange -- Periodicals; Finances internationales -- Périodiques; Change -- Périodiques; Foreign exchange; International finance; Periodicals; 332.04205
• DOI: 10.1016/j.jimonfin.2018.12.011
• Languages: English
• ISSNs: 0261-5606

Abstract

Highlights: Asian head-quartered banks with foreign subsidiaries have increased in number. These banks can draw on the resources of their subsidiaries to shield their lending. There is a hampering of policy transmission to Asian global banks with foreign subsidiaries. During the 2008–09 financial crisis there was a hampering of the monetary stimulus provided by Asian central banks The hampering was strongest amongst foreign owned Asian banks. Abstract: Cetorelli and Goldberg (2012a) have shown that U.S. global banks (those with foreign subsidiaries) can smooth the effects of monetary policy tightening on their lending through drawing on subsidiary resources, giving a hampering of policy transmission. In panel data for Asian banks we find strong evidence of the hampering of policy transmission to interest rates on bank loans, and weaker evidence of hampering in transmission to lending quantities. We also present evidence that financial interdependence within global banks is consistent with the internal capital markets hypothesis that underpins reduced transmission of monetary policy in a globalized banking system.