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on International Finance |
| By: | Carlo Alcaraz; Stijn Claessens; Gabriel Cuadra; David Marques-Ibanez; Horacio Sapriza |
| Abstract: | We assess how a major, unconventional central bank intervention, Draghi's "whatever it takes" speech, affected lending conditions. Similar to other large interventions, it responded to adverse financial and macroeconomic developments that also influenced the supply and demand for credit. We avoid such endogeneity concerns by comparing credit granted and its conditions by individual banks to the same borrower in a third country. We show that the intervention reversed prior risk-taking - in volume, price, and risk ratings - by subsidiaries of euro area banks relative to other local and foreign banks. Our results document a new effect of interventions and are robust along many dimensions. |
| Keywords: | unconventional monetary policy, credit conditions, spillovers |
| JEL: | E51 F34 G21 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:749&r=ifn |
| By: | Abbassi, Puriya (Deutsche Bundesbank); Bräuning, Falk (Federal Reserve Bank of Boston) |
| Abstract: | We use transaction-level data on foreign exchange (FX) forward contracts for the period 2014 through 2016 in conjunction with supervisory balance sheet information to study the drivers of banks’ dollar hedging costs. Comparing contracts of the same maturity that are initiated during the same hour of the same day, we find large heterogeneity in banks’ hedging costs. We show that these costs (i) are higher for banks with a larger FX funding gap, (ii) depend on banks’ FX funding composition in terms of the source (interbank versus retail) and rollover structure (long-term versus short-term), (iii) are lower for banks with deeper internal dollar capital markets, and (iv) increase with banks’ shadow cost of capital. Our results are important for understanding how shocks are transmitted internationally through the FX hedging market. |
| Keywords: | FX markets; foreign exchange; dollar hedging; price determination; global banks; international financial shocks |
| JEL: | D40 E43 F30 F31 G15 |
| Date: | 2018–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbwp:18-6&r=ifn |