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External Seminar by Enzo Dia (Università degli Studi di Milano-Bicocca)
We are glad to welcome Enzo Dia at Reading. His talk will combine two papers on the same general topic: “Unconventional-Policy Spillovers of U.S. Interest on Reserves within Global Dollar-Denominated Retail Loan and Deposit Markets” and “Banking in a Monetary Union“
Here’s the abstract of the first working paper: A linchpin of the Federal Reserve’s unconventional policies has been payment of interest on reserves, of which 16 to 44 percent have been held by foreign banks with U.S. subsidiaries, at a rate typically several basis points higher than other funds rates. This paper constructs a model with competition among domestic banks, foreign banks with domestic subsidiaries, and other foreign banks in dollar-denominated common and local retail markets for loans and deposits. The paper shows that the interest rate on reserves influences not only loan and deposit rates domestically but also in Euro dollar denominated foreign retail markets. We find that while the international Eurodollar market is somewhat insulated from both non-U.S. country-specific shocks and U.S. monetary policy shocks, spillovers of U.S. monetary policy actions onto non-U.S. loan markets can be quite substantial.