Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/214957 
Year of Publication: 
2019
Series/Report no.: 
CESifo Working Paper No. 7955
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper shows that monetary policy and prudential policies interact. U.S. banks issue more commercial and industrial loans to emerging market borrowers when U.S. monetary policy eases. The effect is less pronounced for banks that are more constrained through the U.S. bank stress tests, reflected in a lower minimum capital ratio in the severely adverse scenario. This suggests that monetary policy spillovers depend on banks' capital constraints. In particular, during a period of quantitative easing when liquidity is abundant, banks are more flexible, and the scope for adjusting lending is larger when they have a bigger capital buffer. We conjecture that bank lending to emerging markets during the zero-lower bound period would have been even higher had the United States not introduced stress tests for their banks.
Subjects: 
U.S. bank lending
stress tests
emerging markets
monetary policy spillovers
JEL: 
E44
F31
G15
G21
G23
Document Type: 
Working Paper
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