The Passthrough of Treasury Supply to Bank Deposit Funding

Wenhao Li, Yiming Ma and Yang Zhao

No 34154, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We demonstrate the passthrough of Treasury supply to bank deposits through bank market power. We show that a larger Treasury supply crowds out deposits with disproportionate effects in more competitive deposit markets. A larger Treasury supply further curtails bank lending and affects bank funding structure. The explanatory power of Treasury supply is not driven by other shocks to deposit demand and supply. In comparison, monetary policy rate hikes have a larger impact on deposit funding in more concentrated markets, consistent with the deposits channel of monetary policy. Our empirical findings are rationalized in a model of imperfect deposit competition.

JEL-codes: E50 G21 (search for similar items in EconPapers)
Date: 2025-08
New Economics Papers: this item is included in nep-cba, nep-fmk and nep-mon
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