Excess reserves and monetary policy tightening

Daniel Fricke, Stefan Greppmair and Karol Paludkiewicz

No 05/2024, Discussion Papers from Deutsche Bundesbank

Abstract: We show that the transmission of the European Central Bank's (ECB) recent monetary policy tightening differs across banks depending on their level of excess reserves. Specifically, the net worth of reserve-rich banks may display a boost when the interest rate paid on reserves increases strongly. Focusing on the ECB's 2022 rate hiking cycle, we show that reserve-rich banks' credit supply is less sensitive to the monetary policy tightening compared to other banks. The effect varies in the cross-section of both banks and firms. The results are binding at the firm level, indicating the presence of real effects.

Keywords: interest rates; bank lending; excess liquidity; monetary policy (search for similar items in EconPapers)
JEL-codes: E43 E44 E52 G21 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-fdg, nep-ifn and nep-mon
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:284406

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