Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/264935 
Year of Publication: 
2021
Series/Report no.: 
Working Paper No. 12/2021
Publisher: 
Norges Bank, Oslo
Abstract: 
We explore the impact of low and negative monetary policy rates in core world economies on bank lending in four small open economies - Canada, Chile, the Czech Republic and Norway - using confidential bank-level data. Our results show that the impact on lending in these small open economies depends on the interest rate level in the core. When interest rates are high, monetary policy cuts in core economies can reduce credit supply in small open economies. In contrast, when interest rates in core economies are low, further expansionary monetary policy increases lending in small open economies, consistent with an international bank lending channel. These results have important policy implications, suggesting that central banks in small open economies should watch for the impact of potential regime switches in core economies' monetary policy when rates shift to and from the very low end of the distribution.
Subjects: 
Low and negative interest rate environment (LNIRE)
Cross-border monetary policy spillover
International bank lending channel
Portfolio channel
JEL: 
E43
E52
E58
F34
F42
G21
G28
Persistent Identifier of the first edition: 
ISBN: 
978-82-8379-209-6
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper
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