Paper #1680

Títol:

Global liquidity and impairment of local monetary policy

Autors:

Salih Fendoğlu, Eda Gülşen i José-Luis Peydró

Data:

Novembre 2019

Resum:

We show that global liquidity limits the effectiveness of local monetary policy on credit markets. The mechanism is via a bank carry trade in international markets when local monetary policy tightens. For identification, we exploit global (VIX, U.S. monetary policy) shocks and loan-level data —the credit and international interbank registers— from a large emerging market, Turkey. Softer global liquidity conditions attenuate the pass-through of local monetary policy tightening on loan rates, especially for banks with more access to international wholesale markets. Effects are also important for other credit margins and for risk-taking, e.g. riskier borrowers in FX loans or defaults.

Paraules clau:

Global financial cycle; monetary policy; emerging markets; banks; carry trade

Codis JEL:

G01; G15; G21; G28; F30

Àrea de Recerca:

Macroeconomia i Economia Internacional

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