Does the lack of financial stability impair the transmission of monetary policy?
- We investigate the transmission of central bank liquidity to bank deposits and loan spreads in Europe over the January 2006 to June 2010 period. We find evidence consistent with an impaired transmission channel due to bank risk. Central bank liquidity does not translate into lower loan spreads for high-risk banks, even as it lowers deposit rates for both high-risk and low-risk banks. This adversely affects the balance sheets of high-risk bank borrowers, leading to lower payouts, lower capital expenditures, and lower employment. Overall, our results suggest that banks’ capital constraints at the time of an easing of monetary policy pose a challenge to the effectiveness of the bank lending channel and the effectiveness of the central bank as a lender of last resort.
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| Author: | Viral V. Acharya, Björn Imbierowicz, Sascha SteffenGND, Daniel Teichmann |
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| URN: | urn:nbn:de:hebis:30:3-480571 |
| URL: | https://ssrn.com/abstract=3367885 |
| Parent Title (English): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 620 |
| Series (Serial Number): | CFS working paper series (620) |
| Publisher: | Center for Financial Studies |
| Place of publication: | Frankfurt, M. |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2019 |
| Year of first Publication: | 2019 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2019/04/09 |
| Tag: | Banking crisis; Central bank liquidity; Corporate deposits; Financial crisis; Lender of last resort; Loans; Monetary policy transmission; Real effects |
| Issue: | April 2017 |
| Page Number: | 60 |
| HeBIS-PPN: | 448555212 |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF) | |
| Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
