Banking Globalization, Monetary Transmission and the Lending Channel

By Nicola Cetorelli, Linda S. Goldberg. Social Science Research Network, 2008

130 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/02bdfdd5d1b38463e1e20f145ec0b67bf0d4b60b

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Citations in the corpus

The US Dollar Shortage in Global Banking and the International Policy Response (2009, unknown): “30 Similarly, Cetorelli and Goldberg (2008) present evidence that internationally active US banks often rely on internal markets, ie borrow from foreign affiliates to smooth liquidity shortages.”
The Bank Lending Channel Revisited (2011, unknown): “ ≡ (1 +  )  + (1− )    −    1− = 0 (21)”
Cross-Border Banking and the International Transmission of Financial Distress During the Crisis of 2007-2008 (2010, background): “Cetorelli and Goldberg (2008) show that the existence of internal capital markets with foreign bank a liates contributes to an international propagation of domestic liquidity shocks to lending by a liated banks abroad.”
The US Dollar Shortage in Global Banking (2009, background): “21 Cetorelli and Goldberg (2008) find evidence that US banks often rely on internal markets, ie borrow from foreign affiliates, to smooth liquidity shortages.”