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Monetary Policy and Foreign Denominated Debt by Non-Bank Borrowers

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Beckmann, J., Czudaj, R., Osowski, T. Monetary Policy and Foreign Denominated Debt by Non-Bank Borrowers. Credit and Capital Markets – Kredit und Kapital, 54(3), 423-446. https://doi.org/10.3790/ccm.54.3.423
Beckmann, Joscha; Czudaj, Robert and Osowski, Thomas "Monetary Policy and Foreign Denominated Debt by Non-Bank Borrowers" Credit and Capital Markets – Kredit und Kapital 54.3, 2021, 423-446. https://doi.org/10.3790/ccm.54.3.423
Beckmann, Joscha/Czudaj, Robert/Osowski, Thomas (2021): Monetary Policy and Foreign Denominated Debt by Non-Bank Borrowers, in: Credit and Capital Markets – Kredit und Kapital, vol. 54, iss. 3, 423-446, [online] https://doi.org/10.3790/ccm.54.3.423

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Monetary Policy and Foreign Denominated Debt by Non-Bank Borrowers

Beckmann, Joscha | Czudaj, Robert | Osowski, Thomas

Credit and Capital Markets – Kredit und Kapital, Vol. 54 (2021), Iss. 3 : pp. 423–446

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Joscha Beckmann, Fernuniversität Hagen, FernUniversität in Hagen Chair of Macro­economics Building 3 (IZ) Universitätsstraße 11, E-tract, 1st floor, 58097 Hagen.

Robert Czudaj, Chemnitz University of Technology and Ludwigs-Maximilians-University Munich.

Thomas Osowski, DZ PRIVATBANK S.A.

References

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  2. Beckmann, J./Belke, A./Czudaj, R. (2014a): The Importance of Global Shocks for National Policymakers – Rising Challenges for Sustainable Monetary Policies, The World Economy, Wiley Blackwell, vol. 37(8), pp. 1101–1127, August.  Google Scholar
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  5. Belke, A./Bordon, I. G./Hendricks, T. W. (2010a): Global Liquidity and Commodity Prices – A Cointegrated VAR Approach for OECD Countries. Applied Financial Economics, 20(3), pp. 227–242.  Google Scholar
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  9. Bernanke, B./Boivin, J./Eliasz, P. S. (2005): Measuring the Effects of Monetary Policy: A Factor-augmented Vector Autoregressive (FAVAR) approach. Quarterly Journal of Economics 120, pp. 387–422.  Google Scholar
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  12. Bruno, V./Shin, H. S. (2015b): “Cross-border banking and global liquidity”, Review of Economic Studies, vol. 82, no. 2, pp. 535–64.  Google Scholar
  13. Ca’ Zorzi, M./Dedola, L./Georgiadis, G./Jarociński, M./Stracca, L./Strasser, G. (2020): Monetary policy and its transmission in a globalised world, ECB Working Paper Series No 2407, ECB, Frankfurt am Main, May.  Google Scholar
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  18. Juselius, K. (2006): The cointegrated VAR model: Econometric Methodology and Macroeconomic Applications, Oxford University Press, Oxford.  Google Scholar
  19. Kearns, J./Patel, N. (2016): Does the financial channel of exchange rates offset the trade channel? BIS Quarterly Review, Bank for International Settlements, December.  Google Scholar
  20. Krippner, L. (2019): A Note of Caution on Shadow Rate Estimates. Journal of Money, Credit and Banking 52(4), pp. 951–962.  Google Scholar
  21. Maggiori, M. (2017): Financial Intermediation, International Risk Sharing, and Reserve Currencies. American Economic Review 107 (10), pp. 3038–71.  Google Scholar
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  24. Wu, J. C./Xia, F. D. (2016): Measuring the Macroeconomic Impact of Monetary Policy at the Zero Lower Bound. Journal of Money, Credit and Banking 48, pp. 253–291.  Google Scholar
  25. Baumeister, C./Korobilis, D./Lee, T. K.: “Energy Markets and Global Economic Conditions”, Review of Economics and Statistics, forthcoming.  Google Scholar
  26. Beckmann, J./Belke, A./Czudaj, R. (2014a): The Importance of Global Shocks for National Policymakers – Rising Challenges for Sustainable Monetary Policies, The World Economy, Wiley Blackwell, vol. 37(8), pp. 1101–1127, August.  Google Scholar
  27. Beckmann, J./Belke, A./Czudaj, R. (2014b): Does global liquidity drive commodity prices?, Elsevier, vol. 48(C), pp. 224–234.  Google Scholar
  28. Beckmann, J./Comunale, M. (2020): Exchange rate fluctuations and the financial channel in emerging economies, Bank of Lithuania Working Paper Series 83, Bank of Lithuania.  Google Scholar
  29. Belke, A./Bordon, I. G./Hendricks, T. W. (2010a): Global Liquidity and Commodity Prices – A Cointegrated VAR Approach for OECD Countries. Applied Financial Economics, 20(3), pp. 227–242.  Google Scholar
  30. Belke, A./Bordon, I. G./Volz, U. (2013): Effects of Global Liquidity on Commodity and Food Prices, World Development, Elsevier, vol. 44(C), pp. 31–43.  Google Scholar
  31. Belke, A./Orth, W./Setzer, R. (2010b): Liquidity and the Dynamic Pattern of Asset Price Adjustment: A Global View. Journal of Banking & Finance 34, pp. 1933–1945.  Google Scholar
  32. Berger, B. (2016): Debt-weighted exchange rate indices, Box to Kearns and Patel (2016), BIS Quarterly Review, Bank for International Settlements, December.  Google Scholar
  33. Bernanke, B./Boivin, J./Eliasz, P. S. (2005): Measuring the Effects of Monetary Policy: A Factor-augmented Vector Autoregressive (FAVAR) approach. Quarterly Journal of Economics 120, pp. 387–422.  Google Scholar
  34. Beyer, A./Doornik, J. A./Hendry, D. F. (2000): Constructing Historical euro-Zone Data. Economic Journal, 111(469), pp. 308–327.  Google Scholar
  35. Bruno, V./Shin, H. S. (2015a): “Capital flows and the risk-taking channel of monetary policy”, Journal of Monetary Economics, vol. 71, pp. 119–32.  Google Scholar
  36. Bruno, V./Shin, H. S. (2015b): “Cross-border banking and global liquidity”, Review of Economic Studies, vol. 82, no. 2, pp. 535–64.  Google Scholar
  37. Ca’ Zorzi, M./Dedola, L./Georgiadis, G./Jarocinski, M./Stracca, L./Strasser, G. (2020): Monetary policy and its transmission in a globalised world, ECB Working Paper Series No 2407, ECB, Frankfurt am Main, May.  Google Scholar
  38. Chinn, M./Frankel, J. (2005): Will the euro Eventually Surpass the dollar as Leading International Reserve Currency?, NBER Working Papers 11510, National Bureau of Economic Research, Inc.  Google Scholar
  39. Cubeddu, L. M./Adler, G./Osorio Buitron, C./Puy, D./Li, N./Timmer, Y./Gopinath, G./Casas, C./Meleshchuk, S. (2020): Dominant Currencies and External Adjustment, IMF Staff Discussion Notes 2020/005, International Monetary Fund.  Google Scholar
  40. Husted, L./Rogers, J./Sun, B. (2020): Monetary policy uncertainty, Journal of Monetary Economics, vol. 115(C), pp. 20–36.  Google Scholar
  41. Ilzetzki, E./Reinhart, C. M./Rogoff, K. (2019): Exchange Arrangements Entering the 21st Century: Which Anchor Will Hold? Quarterly Journal of Economics 134 (2), pp. 599–646, 2019  Google Scholar
  42. Juselius, K. (2006): The cointegrated VAR model: Econometric Methodology and Macroeconomic Applications, Oxford University Press, Oxford.  Google Scholar
  43. Kearns, J./Patel, N. (2016): Does the financial channel of exchange rates offset the trade channel? BIS Quarterly Review, Bank for International Settlements, December.  Google Scholar
  44. Krippner, L. (2019): A Note of Caution on Shadow Rate Estimates. Journal of Money, Credit and Banking 52(4), pp. 951–962.  Google Scholar
  45. Maggiori, M. (2017): Financial Intermediation, International Risk Sharing, and Reserve Currencies. American Economic Review 107 (10), pp. 3038–71.  Google Scholar
  46. McCauley, R./McGuire, P./Sushko, V. (2015): US monetary policy, leverage and offshore dollar credit, Economic Policy, vol. 30, no. 82, pp. 187–229.  Google Scholar
  47. Siklos, P. L./Granger, C. W. J. (1997): Regime-Sensitive Cointegration with an Application to Interest-Rate Parity, Macroeconomic Dynamics, Vol. 1(3), pp. 640–657.  Google Scholar
  48. Wu, J. C./Xia, F. D. (2016): Measuring the Macroeconomic Impact of Monetary Policy at the Zero Lower Bound. Journal of Money, Credit and Banking 48, pp. 253–291.  Google Scholar

Abstract

This paper analyzes cross border credit from a new perspective: We assess globally aggregated foreign-denominated credit to non-bank borrowers (provided by the BIS) and analyze which factors drive debt denominated in yen, euro and US dollar between 2003 and 2020. The determinants we analyze include global economic activity, global commodity prices and the evolution of assets in the FED balance sheet. We also consider assets in the ECB and the BOJ Balance in a second step. Our results show that global economic activity is the main driver of dollar debt only before the financial crisis while the Fed balance sheet drives dollar debt afterwards. We also identify a crowding-out effect of FED balance activities on debt denominated in yen and euro. On the other hand, effects of changes in the ECB and BOJ balance are qualitatively less important and more stable.