The dampening effect of bank foreign liabilities on monetary policy: Revisiting monetary cooperation in East Asia

► The cost of monetary cooperation is addressed from the perspective of monetary policy effectiveness. ► Bank level data in East Asia is studied using a dynamic panel data model. ► Bank lending is directly linked to foreign liability holdings. ► Bank foreign liabilities weaken the credit channel of monetary policy. ► Giving up monetary autonomy is less costly when monetary policy is ineffective.