A Prudential trade-off? Leakages and Interactions with Monetary Policy*

While monetary and prudential policies are generally analysed separately, this paper focuses on how the two interact. Taking an international perspective, we show that policy in a centre economy (Euro Area) spill over its borders through bank lending – therefore inducing volatility cross-border flows. Investigating sample of 30 advanced emerging economies, find evidence receiving-country interact with so tighter stance recipient-country mitigates banking flows induced by abroad. But also interactions apart implies higher growth lending. Taken together, these results might suggest trade-off: while reduces flows, it local borrowers resort more to from advantage granularity our confidential dataset, finally explore heterogeneities such leakages arise only for financially open economies financial sector, driven intra-group