The macro-financial effects of international bank lending on emerging markets

Research indicates that cross-border bank lending has a significant impact on meta-economics in emergent markets. An analysis of the size distribution of bilateral cross-border bank lending to 22 emerging market economies (EMEs) reveals insights into the causal effects and specific factors that influence aggregate cross-border bank lending. International bank lending stimulates domestic economic activity and eases financial circumstances in the EME. This is corroborated by the narrowing real and sovereign spreads, relaxed financial condition indexes, decreasing domestic interest rates, and increasing house prices. Cross-border bank lending leads to an increase in imports, real domestic credit, and GDP.

Image courtesy of interviewee. December 20, 2023

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