EconPapers    
Economics at your fingertips  
 

Banks and the State-Dependent Effects of Monetary Policy

Martin Eichenbaum, Federico Puglisi, Sergio Rebelo and Mathias Trabandt

No 33523, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper provides empirical evidence that contractionary monetary policy is less powerful in high interest-rate environments. We argue that this state dependence reflects the interaction between bank’s net interest margins (the return on banks’ assets minus the per-dollar cost of their funds), and households’ high marginal propensity to consume out of liquid wealth. We construct a banking model in which social dynamics shape household attentiveness to deposit rates and embed it in a nonlinear heterogeneous-agent New Keynesian model. Estimated versions of the partial and general equilibrium models account well for the observed state dependence in the response of banks’ net interest margins and the response of aggregate economic activity to monetary policy shocks.

JEL-codes: E44 (search for similar items in EconPapers)
Date: 2025-02
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mon
Note: EFG
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w33523.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

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:33523

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w33523
The price is Paper copy available by mail.

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 ().

 
Page updated 2025-08-19
Handle: RePEc:nbr:nberwo:33523