Document Type
Article
Publication Date
2014
Abstract
The goal of this paper is to examine the sensitivity of US bank lending to movements in the exchange rate. Using a panel of quarterly bank-level balance sheet observations, I show that there exists significant and meaningful exchange rate sensitivity of cross-border lending activity and total domestic loans. This relationship operates through traditional net export channels, as well as mechanisms specific to banks engaged in international lending. Further, I show that exchange rate innovations represent a source of long run lending volatility equivalent to monetary policy shocks for small banks. Lastly, exchange rate movements are shown to be associated with a four-fold increase in growth of non-performing loans for small banks, providing direct evidence of transfer risk for cross-border banks.
DOI
10.4236/me.2014.58078
Recommended Citation
Jonas, M. (2014) Is US Bank Lending Sensitive to Exchange Rates? A Panel Data Investigation. Modern Economy, 5, 848-863. doi: 10.4236/me.2014.58078.
Comments
Copyright © 2014 by author and Scientific Research Publishing Inc. This work is licensed under the Creative Commons Attribution International License (CC BY). http://creativecommons.org/licenses/by/4.0/ Article available at: http://dx.doi.org/10.4236/me.2014.58078