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Foreign banks and the bank lending channel

Denderski, Piotr and Paczos, Wojtek 2020. Foreign banks and the bank lending channel. Economic Inquiry 10.1111/ecin.12942
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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)

Item Type: Article
Date Type: Published Online
Status: In Press
Schools: Business (Including Economics)
Publisher: Wiley
ISSN: 0095-2583
Date of First Compliant Deposit: 6 August 2020
Date of Acceptance: 20 July 2020
Last Modified: 05 Nov 2020 14:59

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