What role do deposits play in the international transmission of US monetary policy shocks? We find that the US monetary shocks are transmitted internationally through banks' deposits. Specifically, we document that after a 1 p.p. unexpected increase in the policy rate, global banks increase deposit spreads by 0.2 p.p. and experience a 3% decline in deposit growth. Consequently, global banks increase net transfers from foreign branches by 40.4% to finance lending. It allows them to reduce lending growth by half as much as domestic banks per percent of deposit outflow. Finally, global banks contract foreign lending growth by 1.3%.
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