Template-Type: ReDIF-Paper 1.0
Author-Name: Torsten Ehlers
Author-X-Name-First: Torsten
Author-X-Name-Last: Ehlers
Author-Name: Mathias Hoffmann
Author-X-Name-First: Mathias
Author-X-Name-Last: Hoffmann
Author-Name: Alexander Raabe
Author-X-Name-First: Alexander
Author-X-Name-Last: Raabe
Title: Dollar funding and housing markets: the role of non-US global banks
Abstract: House prices co-move considerably across countries. We show how non-US global banks and their exposure to US dollar funding conditions help explain this comovement. When the dollar appreciates, mortgage lending and house prices decrease more in borrower countries whose non-US creditor banks are more exposed to dollar funding conditions. As US dollar funding conditions vary, borrowing country pairs with higher joint exposure to US dollar funding conditions via their non-US creditor banks exhibit a higher synchronization of mortgage credit and house price growth. We capture the exposure to dollar funding conditions by the bilateral treasury basis between the currency of the non-US global creditor banks' nationality and the US dollar, a choice that we motivate in a simple value-at-risk model. Our results identify a novel international spillover channel of US dollar funding conditions. Because it works through heterogenous dollar funding exposures among creditors, this new channel is neither linked to common-lender exposures nor to currency mismatches on borrower countries' balance sheets, typically associated with the financial channel of the exchange-rate.
Creation-Date: 2026-02
File-URL: https://www.bis.org/publ/work1332.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1332.htm
File-Format: text/html
Number: 1332
Keywords: house prices, synchronization, US dollar funding, dollar cycle, US treasury basis, convenience yield, capital flows, global banks, global banking network
Classification-JEL: F34, F36, G15, G21
Handle: RePEc:bis:biswps:1332