{
  "title": "US vs. Euro Area: Who Drives Cross-Border Bank Lending to EMs?",
  "publication": "IMF Working Papers, September 20, 2019",
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  "summary": "This paper analyzes the drivers of cross-border bank lending to 49 Emerging Markets (EMs) during the period 1990Q1-2014Q4, by assessing the impact of monetary, financial and real sector shocks in both the US and the euro area.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Paper analyzes drivers of cross-border bank lending to 49 Emerging Markets (EMs) during the period 1990Q1-2014Q4.\n- Simultaneous assessment of monetary, financial, and real sector shocks originating in the US and the euro area (EA), and their interactions.\n- Author: Eugenio M Cerutti. Publication date: September 20, 2019. Pages: 32. Volume: 2019. Issue: 199. Working Paper No. 2019/199. Stock No: WPIEA2019199. ISBN: 9781513511900. ISSN: 1018-5941. DOI: https://doi.org/10.5089/9781513511900.001"
    },
    {
      "heading": "Key findings",
      "content": "- US monetary policy tightening has a negative impact on cross-border lending to EMs.\n- EA monetary policy appears to have an impact mostly on Emerging Europe.\n  - Interpretation: cross-border lending to most other EM regions is dollar denominated, reducing EA policy transmission outside Emerging Europe.\n- Real sector shocks in both the US and EA trigger an increase in cross-border lending.\n  - Effect is smaller for EA real sector shocks when the financial sector is explicitly modeled.\n- Financial sector shocks (e.g., associated with a decrease in bank leverage):\n  - If the shock originates in the US: broad-based overall contraction of cross-border lending.\n  - If the shock originates in the EA: heterogeneous effects across borrowing regions."
    },
    {
      "heading": "Drivers and interactions analyzed",
      "content": "- Monetary shocks: US and EA central bank policy actions and yield-curve related variables.\n- Financial sector shocks: banking-sector variables including bank leverage.\n- Real sector shocks: real economy disturbances in the US and EA.\n- Simultaneous modeling allows assessment of interactions between monetary, financial, and real sector channels from two major supply regions to EM borrowing."
    },
    {
      "heading": "Regional heterogeneity",
      "content": "- Emerging Europe: more sensitive to EA monetary policy shocks.\n- Other EM regions: more exposed to US-driven transmission, consistent with dollar-denominated cross-border lending.\n- Borrowing-region responses to EA-originating financial shocks are heterogeneous rather than uniformly contractionary."
    },
    {
      "heading": "Subject coverage and keywords (as provided)",
      "content": "- Subjects: Bank credit, Banking, Central bank policy rate, Cross-border banking, Economic sectors, Financial sector, Financial services, Money, Yield curve.\n- Keywords: Asia and Pacific, Bank credit, bank leverage, bond yield, Central bank policy rate, cross-border bank lending, Cross-border banking, cross-border lending, EA bank, EA monetary policy, EA shock, emerging markets, Europe, Financial sector, Global, global banks, monetary policy, risk attitude, WP, Yield curve."
    },
    {
      "heading": "Policy implications (implied by results)",
      "content": "- Monitoring and macroprudential coordination should account for:\n  - Dominant role of US monetary and financial shocks in triggering broad contractions in cross-border lending.\n  - Regional sensitivity to EA policy in Emerging Europe.\n  - Dollar-denomination of lending as a key factor in transmission differences across EM regions.\n- Financial stability analysis of cross-border exposures should incorporate simultaneous US and EA shock channels and their interactions with real-sector developments.\n\nEugenio M Cerutti, \"US vs. Euro Area: Who Drives Cross-Border Bank Lending to EMs?\", IMF Working Papers 2019, 199 (2019).\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2019/09/20/us-vs-48609"
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    "Authors: Eugenio M Cerutti",
    "Published: September 20, 2019",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513511900.001",
    "Paper analyzes drivers of cross-border bank lending to 49 Emerging Markets (EMs) during the period 1990Q1-2014Q4.",
    "Simultaneous assessment of monetary, financial, and real sector shocks originating in the US and the euro area (EA), and their interactions.",
    "Author: Eugenio M Cerutti. Publication date: September 20, 2019. Pages: 32. Volume: 2019. Issue: 199. Working Paper No. 2019/199. Stock No: WPIEA2019199. ISBN: 9781513511900. ISSN: 1018-5941. DOI: https://doi.org/10.5089/9781513511900.001",
    "US monetary policy tightening has a negative impact on cross-border lending to EMs.",
    "EA monetary policy appears to have an impact mostly on Emerging Europe.",
    "Real sector shocks in both the US and EA trigger an increase in cross-border lending.",
    "Financial sector shocks (e.g., associated with a decrease in bank leverage):",
    "Monetary shocks: US and EA central bank policy actions and yield-curve related variables.",
    "Financial sector shocks: banking-sector variables including bank leverage.",
    "Real sector shocks: real economy disturbances in the US and EA.",
    "Simultaneous modeling allows assessment of interactions between monetary, financial, and real sector channels from two major supply regions to EM borrowing.",
    "Emerging Europe: more sensitive to EA monetary policy shocks.",
    "Other EM regions: more exposed to US-driven transmission, consistent with dollar-denominated cross-border lending.",
    "Borrowing-region responses to EA-originating financial shocks are heterogeneous rather than uniformly contractionary.",
    "Subjects: Bank credit, Banking, Central bank policy rate, Cross-border banking, Economic sectors, Financial sector, Financial services, Money, Yield curve.",
    "Keywords: Asia and Pacific, Bank credit, bank leverage, bond yield, Central bank policy rate, cross-border bank lending, Cross-border banking, cross-border lending, EA bank, EA monetary policy, EA shock, emerging markets, Europe, Financial sector, Global, global banks, monetary policy, risk attitude, WP, Yield curve.",
    "Monitoring and macroprudential coordination should account for:",
    "Financial stability analysis of cross-border exposures should incorporate simultaneous US and EA shock channels and their interactions with real-sector developments.",
    "**Working Paper**"
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