After the Global Crisis, accommodative monetary policy also eased financial conditions in emerging market economies. This column shows that US banks contributed to the transmission of US monetary policy and that regulation and supervision attenuated it. Only US banks that performed well in the Fed’s annual stress tests expanded their lending to emerging markets in response to monetary easing. Banks that performed poorly left their lending unchanged.
By Emily Liu, Friederike Niepmann and Tim Schmidt-Eisenlohr
Link: Stress tests can limit international spillovers of accommodative monetary policy