BIS Working Paper: How does the interaction of macroprudential and monetary policies affect cross-border bank lending?

Authors:
Előd Takáts and Judit Temesvary

Date:
May 2019

Abstract:

We combine a rarely accessed BIS database on bilateral cross-border lending flows with cross-country data on macroprudential regulations. We study the interaction between the monetary policy of major international currency issuers (USD, EUR and JPY) and  macroprudential policies enacted in source (home) lending banking  systems. We find significant interactions. Tighter macroprudential  policy in a home country mitigates the impact on lending of monetary  policy of a currency issuer. For instance, macroprudential tightening in the UK mitigates the negative impact of US monetary tightening on USD-denominated cross-border bank lending outflows from UK banks. Vice-versa, easier macroprudential policy amplifies impacts. The results are economically significant.

Link: How does the interaction of macroprudential and monetary policies affect cross-border bank lending?