The Impact of Monetary Policy on Bank Funding Composition: The Role of Deposit Market Regulation

Kaiji Chen, Yiqing Xiao and Tao Zha

No 31396, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In well-developed financial markets, wholesale funding comoves negatively with retail deposits in response to interest rate changes, thereby weakening monetary policy transmission. By contrast, our study finds that in economies such as China where deposit rate ceilings are regulated, (i) retail deposits and wholesale funding comove positively as the policy rate changes, and (ii) wholesale funding strengthens the transmission of the policy rate to bank lending. We develop a theoretical model underscoring the role of deposit market regulation for the impact of monetary policy on bank funding composition in the context of the world's largest emerging market economy.

JEL-codes: E02 E5 G11 G12 G28 (search for similar items in EconPapers)
Date: 2023-06
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fdg and nep-mon
Note: AP EFG ME
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w31396.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:31396

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w31396

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().