Balance Sheet Channel Of Monetary Policy Research Articles

The Augmented Bank Balance-Sheet Channel of Monetary Policy

The Augmented Bank Balance-Sheet Channel of Monetary Policy

The Augmented Bank Balance-Sheet Channel of Monetary Policy

The Augmented Bank Balance-Sheet Channel of Monetary Policy

The Augmented Bank Balance-Sheet Channel of Monetary Policy

The Augmented Bank Balance-Sheet Channel of Monetary Policy

Why Do Bank-Dependent Firms Bear Interest-Rate Risk?

I document that floating-rate loans from banks (particularly important for bank-dependent firms) drive most variation in firms' exposure to interest rates. I argue that banks lend to firms at floating rates because they themselves have floating-rate liabilities, supporting this with three key findings. Banks with more floating-rate liabilities, first, make more floating-rate loans, second, hold more floating-rate securities, and third, quote lower prices for floating-rate loans. My results establish an important link between intermediaries' funding structure and the types of contracts used by non-financial firms. They also highlight a role for banks in the balance-sheet channel of monetary policy.

Why Do Bank-Dependent Firms Bear Interest-Rate Risk?

I document that floating-rate loans from banks (particularly important for bank-dependent firms) drive most variation in firms' exposure to interest rates. I argue that banks lend to firms at floating rates because they themselves have floating-rate liabilities, supporting this with three key findings. Banks with more floating-rate liabilities, first, make more floating-rate loans, second, hold more floating-rate securities, and third, quote lower prices for floating-rate loans. My results establish an important link between intermediaries' funding structure and the types of contracts used by non-financial firms. They also highlight a role for banks in the balance-sheet channel of monetary policy.

Borrowers' Financial Constraints and the Transmission of Monetary Policy: Evidence from Financial Conglomerates

Building on recent evidence concerning the functioning of internal capital markets in financial conglomerates, we conduct a novel test of the balance-sheet channel of monetary policy. Specifically, we investigate how the response of lending to monetary policy differs across small banks that are affiliated with the same bank holding company but operate in different geographical areas. These banks face similar constraints in accessing internal and external sources of funds, but have different pools of borrowers. Because they typically concentrate their lending with small local businesses, we can exploit cross-sectional differences in local economic indicators at the time of a policy shock to study whether the strength of borrowers' balance sheets affects the response of bank lending. We find evidence that the negative response of bank loan growth to a monetary contraction is significantly stronger when borrowers have weaker balance sheets.

Monetary Policy with a Touch of Basel

The typical portrait of monetary policy has the banks and the money supply being manipulated through changes in reserves. However, with only a small portion of deposits now subject to reserve requirements, an alternative explanation of how monetary policy influences banks is needed. Over the last decade capital requirements have effectively replaced reserve requirements as the main constraint on the behavior of banks. This paper explores the implications of risk-based capital requirements, a la Basel, for monetary policy. In particular, we identify a bank balance-sheet channel of monetary policy, which operates through the impact of monetary policy on capital. We analyze the dynamics of the transmission mechanism and highlight its impact on the money stock and the economy, when banks are subject to capital requirements similar to those adopted under the Basel Accord.

Monetary Policy with a touch of Basel

The typical portrait of monetary policy has the banks and the money supply being manipulated through changes in reserves. However, with only a small portion of deposits now subject to reserve requirements, an alternative explanation of how monetary policy influences banks is needed. Over the last decade, capital requirements have effectively replaced reserve requirements as the main constraint on the behavior of banks. This paper explores the implications of Basel capital requirements for monetary policy. In particular, we identify a bank balance-sheet channel of monetary policy, which operates through the impact on the money stock and the economy.

Monetary Policy with a Touch of Basel

The typical portrait of monetary policy has the banks and the money supply being manipulated through changes in reserves. However, with only a small portion of deposits now subject to reserve requirements, an alternative explanation of how monetary policy influences banks is needed. Over the last decade, capital requirements have effectively replaced reserve requirements as the main constraint on the behavior of banks. This paper explores the implications of Basel capital requirements for monetary policy. In particular, we identify a bank balance-sheet channel of monetary policy, which operates through the impact on the money stock and the economy.