The effects of monetary policy on the composition of bank deposits and on loan supply

Mattia Girotti

Rue de la Banque, 2018, issue 59

Abstract: Using US bank level data, this Rue de la Banque shows that when monetary policy tightens, banks with a larger proportion of zero-interest deposits on their balance sheet experience larger increases in their interest-bearing deposit rate. A larger increase in the interest-bearing deposit rate then corresponds to a larger decrease in their loan supply. Therefore, the funding composition of the banking system plays a role in the transmission of monetary policy: the bank lending channel is still at play.

Date: 2018
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