Local Monetary Policy

Vyacheslav Fos, Tommaso Tamburelli and Nancy Xu

No 20312, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: When Federal Reserve districts experience high inflation or low unemployment but lack voting rights to influence FOMC decisions, credit extended to commercial banks through the Discount Window (DW) declines. Our identification strategy is based on the exogenous rotation of voting rights among Reserve Banks and on within borrower-time and district-time variation in DW loans and Federal Home Loan Bank (FHLB) loans, implying that factors related to changes in macroeconomic conditions, local credit demand, or borrower characteristics do not drive the results. The effect on bank funding sources translates into changes in the composition of loans extended by commercial banks.

JEL-codes: D7 E5 E51 E58 (search for similar items in EconPapers)
Date: 2025-05
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