This study exploits a legal change in Brazil to identify the extent to which new information generated by credit bureaus translates into different loan interest rates. The legal change enabled private credit bureaus (PCBs) to build new credit scores for approximately 100 million individuals, based on a broader scope of positive information, such as loan flow and repayment patterns. We find an average reduction of 3.7% in the interest rates of personal loans to borrowers whose new scores became available for sale by the PCBs. The effects are amplified when the new score is substantially higher than the old score, reaching an average reduction of 8.7%. We also find stronger results for new clients and for private banks. The mechanisms behind our results include both the reassessment of borrower credit risk and higher competition among lenders coming from the dissemination of new positive information. We also provide empirical evidence consistent with information sharing reducing the ability of lenders to informationally lock-in their borrowers.
This paper studies how credit de-dollarization occurs in a financially dollarized economy. Using monthly Peruvian credit data by firm-size segment and currency, we first show that aggregate de-dollarization is driven mainly by changes in the currency composition of credit within borrower segments, rather than by shifts in the allocation of credit across borrower groups. A nested currency decomposition indicates that this adjustment is primarily associated with local-currency credit expansion, not only with foreign-currency credit contraction. We then estimate a VARX connectedness system in which macro-financial variables enter as exogenous controls. Conditional Diebold-Yilmaz connectedness among segment-level dollarization changes is moderate throughout the sample. It increases during the pandemic liquidity episode and remains above its pre-pandemic level during normalization, but its magnitude does not support the view of a highly integrated dollarization network. Finally, a currency-block connectedness exercise shows that, after 2020, local-currency credit becomes more connected across borrower segments and contributes more to cross-currency transmission than foreign-currency credit. The results suggest that Peru’s de-dollarization was mainly a within-segment shift toward local-currency credit, and that after 2020 this margin became more embedded in cross-segment credit dynamics. The evidence is therefore more consistent with local-currency credit deepening than as a mechanical reallocation of credit or a purely spillover process.
Global supply chain disruptions were a major driver of the inflation surge in the pandemic era. In this paper, I investigate how key macroeconomic indicators shape inflation risk in Mexico and whether global supply chain pressures affect it. Using a quantile augmented Phillips Curve, I show that global supply chain pressures shift the entire 1-year-ahead predictive distribution of inflation to the right, having a higher effect on upper percentiles. Then, I ask whether monetary policy can manage inflation risk. Using high-frequency identified monetary policy shocks, I find a non-linear effect across the predicted inflation distribution. Policy shocks can curb right-tail inflation risks but have a small effect on the lower part of the distribution. My findings suggest that policymakers have room to maneuver to reduce tail risks, even when these are driven by external factors, such as global supply chain disruptions.
We investigate the role of interbank market frictions in the monetary policy transmission mechanism in the U.S. in 1990–2007, employing a state-dependent local projection model. We find that under a high liquidity premium (reflecting high interbank market frictions), the standard effects of a monetary tightening on industrial production and the price level are amplified. Under a low liquidity premium, they are muted. Our findings empirically support the theoretical proposition in Bianchi and Bigio (2022) that when banks are not satiated with reserves, an open market operation (OMO) that decreases reserves will increase the liquidity premium, affecting bank lending and price level. When banks are satiated with reserves, OMO does not affect the economy.
Amid global monetary tightening, understanding how policy shocks propagate in emerging economies is critical. This paper examines the amplification of monetary policy transmission through the banking channel in Chile using quarterly Bank Lending Survey data (2003Q1–2023Q3) and a local projection framework. We find that lending standards and credit conditions tighten significantly following a positive monetary policy surprise, with effects amplified during periods of high policy rates (⩾5%) and when banks report capital constraints. These nonlinear responses are robust across major credit segments—consumption, mortgage, corporate, and small and medium-sized enterprises loans—with the strongest and most persistent effects in enterprise credit. Our findings highlight the state-contingent potency of monetary policy transmission through the banking channel in structurally similar emerging market economies and, from a policy perspective, underscore the importance of incorporating this dynamic into monetary policy design, as well as the need for coordination across macroeconomic policies.
