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Abstract

Since the 90s, the rapid financial integration has stimulated a sharp increase in international bank lending. In this context, should we expect a monetary policy tightening in systemic countries to increase cross-border bank lending or to trigger a sudden reversal of capital flows? Using a panel of nine systemic countries of origin and 46 recipient countries, we find that a tightening of domestic monetary policy decreases international bank lending, due to an increase in funding costs or a rise in risk-aversion.