Banking globalization, monetary transmission and the lending channel

Nicola Cetorelli and Linda Goldberg

No 2008,21, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank

Abstract: The globalization of banking in the United States is influencing the monetary transmission mechanism both domestically and in foreign markets. Using quarterly information from all U.S. banks filing call reports between 1980 and 2005, we find evidence for the lending channel for monetary policy in large banks, but only those banks that are domestically-oriented and without international operations. We show that the large globally-oriented banks rely on internal capital markets with their foreign affiliates to help smooth domestic liquidity shocks. We also show that the existence of such internal capital markets contributes to an international propagation of domestic liquidity shocks to lending by affiliated banks abroad. While these results imply a substantially more active lending channel than documented in the seminal work of Kashyap and Stein (2000), the lending channel within the United States is declining in strength as banking becomes more globalized.

Keywords: Lending channel; Bank; global; liquidity; transmission; internal capital markets (search for similar items in EconPapers)
JEL-codes: E44 F36 G32 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (64)

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Related works:
Working Paper: Banking globalization, monetary transmission, and the lending channel (2008)
Working Paper: Banking Globalization, Monetary Transmission, and the Lending Channel (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp1:7446

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