Arbitraging Covered Interest Rate Parity Deviations and Bank Lending

• 成果类型: Article
• 署名作者: Keller, Lorena
• 署名单位: University of Pennsylvania
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20230425
• 发表日期: 2024
• 页码: 2633-2667
• 关键词: internal capital-markets; INVESTMENT; dollar; FIRMS

摘要

I propose and test a new channel through which covered interest rate parity (CIP) deviations can affect bank lending in emerging econo-mies. I argue that when CIP deviations exist, banks attempt to arbi-trage them. To do so, banks must borrow in a particular currency. When this currency is scarce, bank lending in the currency required to arbitrage decreases, while they use this currency in their arbitrage activities. I test this channel by exploiting differences in the abilities of Peruvian banks to arbitrage CIP deviations. I find evidence that supports the proposed channel.