Brzoza-Brzezina, Michał Chmielewski, Tomasz Niedźwiedzińska, Joanna
Year of Publication:
ECB Working Paper 1187
In this paper we analyse the impact of monetary policy on total bank lending in the presence of a developed market for foreign currency denominated loans and potential substitutability between domestic and foreign currency loans. Our results, based on a panel of four biggest Central European countries (the Czech Republic, Hungary, Poland and Slovakia) confirm significant and probably strong substitution between these loans. Restrictive monetary policy leads to a decrease in domestic currency lending but simultaneously accelerates foreign currency denominated loans. This makes the central bank’s job harder.
Central Europe Domestic and foreign currency loans monetary policy substitution