Author: Luka BajecPublisher:
ISBN:
Category :
Languages : en
Pages : 78
Book Description
Three Essays on the Bank Lending Channel
Author: Luka BajecThree Essays On The Bank Lending Channel
Author: Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Monetary policy is commonly assumed to impact on commodity demand via relative prices. The bank lending channel (BLC) proposes an additional effect via the quantity of loans. This has found its way into economic textbooks, although it remains empirically controversial. I present various theoretical criticisms of the BLC and its building block, the formal model by Bernanke and Blinder (1988). This model operates with lopsided loan demand, money demand and money supply functions. The logic of the BLC is valid for individual investors who are affected by a cut in bank loans. For a whole sector with a given level of interest rates a reduction of loans does not however dry up investment, but only the holding of money. Since 1988 academics have been using model by Bernanke and Blinder as a work horse to empirically address the question of the quantitative relevance of the BLC. Cecchetti (1995) und Hubbard (1995) summarize the overall evolution of the controversial debate up to then. The data used for the research is mainly from the United States. In this literature review, I mainly focus on the next and more recent cohort of empirical investigations on the BLC in Europe that follow papers by Kashyap and Stein (1995, 2000) and Kishan and Opiela (2000) on U.S. transmission mechanisms. It is crucial that these authors are the first to address the question using individual bank balance sheet data for the U.S. Until now, empirical research has produced largely inconsistent results. This is more revealing as many of these investigations have deficiencies in controlling for other transmission channels that relate to relative prices. The debate on how monetary policy works has not ended: the BLC, which stresses the importance of potential changes in the supply of loans as a result of monetary policy, and its subsequent impact on aggregate demand, became prominent recently, but the concluding empirical evidence is absent. I attempt to contribute to this debate by conducting a cros.
Three Essays on Bank Lending
Author: Fulvia FringuellottiThree Essays on Bank Lending, Liquidity, and the Macroeconomy
Author: Torsten EhlersThree Essays on the Theory of Banking
Author: Sarah Blaine KendallPublisher:
ISBN:
Category :
Languages : en
Pages : 374
Book Description
Essays on the Monetary Transmission Mechanism, Changes in the United States Banking System and Small Business Lending
Author: David VeraPublisher:
ISBN:
Category : Bank loans
Languages : en
Pages : 0
Book Description
My first essay is a survey of the literature on the bank-lending channel of monetary policy, banking deregulation in the U.S. and small business lending. This literature provides a framework for exploring questions of how recent changes in banking deregulation may have affected the monetary transmission mechanism and small business lending. In my second essay, I provide evidence that the monetary transmission mechanism in the U.S. has changed. In particular, using aggregate data I show that monetary policy shocks no longer have the significant effects on bank loans that were previously demonstrated in the literature. The smaller response of bank loans coincides with a period of deregulation in the banking system that triggered banking consolidation. Using bank-level data, I tie the changes in the monetary transmission mechanism to changes in the response of bank loans resulting from mergers. Consistent with earlier research that linked monetary policy effects to banks' balance sheet characteristics, I show that the growth of loans of banks that have merged is less sensitive to monetary policy shocks than that of banks not taking part in mergers. In my third essay I explore the link between changes in the banking system and small business lending. Research on banking indicates that small banks appear to be the main providers of credit to small businesses. Recent changes in banking legislation that have triggered consolidation have raised concerns over the availability of credit to small businesses. In this paper I provide evidence that even though recent changes in banking legislation have decreased the number of small banks, they have not had an effect on total small business lending. I also provide evidence that small banks may be participating less in small business lending. These results have implications for both the smaller output volatility recently documented in the literature as well as for a diminished bank-lending channel of the monetary transmission mechanism.
Three Essays on Bank Profitability, Fragility, and Lending
Author: Mahmoud ShahinThree Essays on the Transmission of Monetary Policy in the Euro Area
Author: Matthieu PicaultPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
After September 2008, due to a frozen interbank market, shortage of liquidity, loss of confidence, and collapsing financial institutions, the monetary policy transmission in the euro area was severely impaired. Under thus exceptional circumstances, the European Central Bank (ECB) had to turn to non-standard monetary policy measures. Considering, in the euro area, the constrained range of actions and fragmented financial markets, the objective of this empirical thesis is to assess the transmission channels of ECB standard and non-standard monetary policies and their effects on both financial markets and the economy.As banks' lending behaviors are related to their financing costs, the first essay focuses on bank lending channel. It studies the evolution of lending activities of European financial institutions on the syndicated loan market and its reaction to the ECB standard and non-standard policies. The communication of the central bank is of utmost importance in a monetary union with heterogeneous, in terms of economic situations and cultures, countries. The second and third essays study the signaling channel of monetary policy. The second essay focuses on the communication during monthly press conferences and their effects on the predictability of monetary policy decisions and on financial markets returns and volatility. The last essay concentrates exclusively on the use of \textit{forward guidance} on interest rate, a non-standard central bank communication providing information on future short-term interest rates. It discusses its effectiveness and ability to lower market participants expected interest rates.
Three Essays on the Transmission of Monetary Policy to Non-bank Credit Activity
Author: Karl David BoulwarePublisher:
ISBN:
Category : Electronic dissertations
Languages : en
Pages : 177
Book Description
This dissertation is composed of three essays that measure the impact of monetary policy on non-bank credit activity by issuer, composition, and duration. The first essay measures the dynamic impact of monetary policy on gross repurchase agreement activity of primary government dealers of the Federal Reserve System. The second essay measures the dynamic impact of monetary policy on commercial paper activity. The third essay measures the impact of monetary policy on issuers of asset-backed securities. In the first essay, we find a positive shock to the federal funds rate significantly affects the level of credit activity. In particular, repo arrangements longer than a day display persistent declines. By comparison, overnight financing increases after a delay. This implies that contractionary monetary policy shocks lead to maturity substitution in the repo market. Our findings show that credit activity in the repo market is more sensitive to monetary policy than previously reported in the literature. In the second essay, our measure of contractionary monetary policy shocks corresponds to a sharp decline in money market mutual fund assets. Though there is an increase in aggregate commercial paper volumes, the impact of monetary policy is stronger for issuers with less liquid balance sheets. Specifically, issuers of asset-backed paper and issuers with second tier credit ratings. Furthermore, there is evidence of a broad substitution towards shorter maturities, in particular for asset backed and nonfinancial paper. In the final essay, we find that an anticipated increase in the target for the federal funds rate impacts the behavior of ABS issuers. In particular, we find commercial paper issuance rises while bond issuance falls. Consequently, our results support the existence of a liquidity risk channel for monetary policy operating through the total supply of non-bank credit activity. In this manner, our findings indicate the monetary transmission mechanism contributes to systemic risk in the shadow banking system through rollover risk. As a result, non-bank credit activity is an important component of the relationship between monetary policy and financial stability.
Essays on Banking
Author: Mattia GirottiPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
This thesis focuses on the economics of banking and is composed of three chapters. The first chapter explores the effects of monetary policy changes on U.S. banks' liability structures and funding costs. Banks obtain most of their funding from a combination of demand deposits -- i.e. zero-interest deposits -- and interest-bearing deposits. Using local demographic variations as instruments for banks' liability structures, I measure the impact of monetary policy changes on each bank's interest-bearing deposit rate as a function of the bank's initial liability structure. I find that when monetary policy tightens each bank faces an outflow of demand deposits. It responds by issuing more interest-bearing deposits, but pays on them an interest rate that increases with the quantity of demand deposits being substituted. This finding supports the existence of the bank lending channel of monetary policy transmission. I also provide evidence that larger banks can substitute funding sources more cheaply than smaller banks, and that demand deposits are less sensitive to monetary policy changes when the local banking market is more concentrated. The second and third chapters focus on mutual banks, which primarily differ from stock banks on the ground of ownership. Mutual banks are owned by their customers, while stock banks by investors. In the second chapter, Richard Meade and I provide an assessment of the effect on depositor welfare of the events of “demutualization”. In recent decades, many U.S. savings banks have demutualized, by converting from customer ownership to investor ownership. We first estimate a random coefficients logit model of bank deposit account choice, using data on commercial and savings banks from 1994 to 2005. Having recovered depositors' preferences for bank attributes, we then measure the effect on depositor welfare of a simulated demutualization of all customer-owned savings banks. We find that, on average, depositors' welfare would increase. In particular, if demutualized savings banks offered a deposit rate in line with other investor-owned savings banks, each depositor would gain 1.14 dollar annually, for a total of 22 million dollar for each state and year. Our findings cast doubt on whether U.S. customer-owned savings banks are well serving their customers' interests, and offers a new explanation for observed U.S. savings bank demutualizations. In the third chapter, Thierry Magnac, Karine Van der Straeten, and I first present evidence that U.S. mutual banks are less risky, lend at lower rates, and have stronger ties to their local communities. We then propose a model of competition between mutual and stock banks building on Martinez-Miera and Repullo (RFS, 2010). We assume that the difference between the two bank types is that mutual banks, given their stronger local reach, impose a greater non-monetary “social cost” on the loan-takers who fail. We simulate the model and assess the effect of competition on the probability of bank failure in the two bank types. Our results indicate that, in accordance with the empirical evidence presented, mutual banks charge a lower loan rate and have a lower probability of failure, at any level of competition. Moreover, similarly to what happens to stock banks, their probability of failure is U-shaped in the level of competition.