Global spill-over effects of U.S monetary policy: influence on non-US government borrowing from private banking systems.

摘要

There has been a wide discussion on the global spill-over effects of U.S monetary policy and several studies have examined the effects on credit markets and subsequent exchange rate movements. The current global tapering debate has focused on the unconventional monetary policy of quantitative easing and its global impacts. However, little is known about how sovereign borrowers respond to shifts in U.S monetary policy, and whether global tapering bears substantial downside risk to the stability of their domestic banking systems in emerging market economies. This paper addresses this gap in the research by studying how the differential between a country's own T-bill rate and the U.S T-bill rate influences government borrowing from the private banking system in that country. The analysis uses a fixed effect model controlling for fundamental economics, financial market and banking system dynamics, and political influences. The database comes from World Development Indicators 2013 and NBRE Trilemma Indexes 2012, and covers 125 countries over a 15-year time span (1995-2009). The results show a significantly positive relationship, indicating that when the interest rate differential becomes larger, governments tend to borrow more from the private banking systems in their own countries. Further robustness tests also demonstrate the significantly negative influence that U.S interest rates have on sovereign borrowing from banks in other countries. These findings serve as warnings to governments worldwide, especially in emerging markets, to pay attention to the financial and economic instability resulting from the spill-over effects of U.S monetary policy through the mechanism of interest rates.