Description:
We show that an expansive foreign monetary policy, where global banks are headquartered, increases the borrowing activity of their subsidiaries in local money markets in the countries of residence. We use a unique dataset of the Mexican money market. We report evidence that a limited flexibility in cross-border flows drives our findings, which is induced by the capital independence of the subsidiary structure of global banks in Mexico. Thus, under constrained cross-border flows, the global risk-taking channel of monetary policy transmission might still emerge, where the extra liquidity obtained by global bank subsidiaries might be used in new risky positions