Bank regulation and monetary policy transmission: Evidence from the U.S. States liberalization

Aeimit Lakdawala, Raoul Minetti and Matthew Schaffer

European Economic Review, 2021, vol. 138, issue C

Abstract: This paper studies the impact of geographic banking restrictions on monetary policy transmission. Exploiting the staggered state-level deregulation of U.S. banking from the late 1970s to the early 1990s, we find that interstate deregulation sharply increased the responsiveness of bank lending to monetary shocks, nearly doubling it. The effect occurred primarily for small and illiquid banks, pointing to a strengthening of the bank lending channel of monetary transmission. We find that this is especially due to a lower propensity of small banks affiliated with complex bank holding companies to insulate borrowers from monetary contractions.

Keywords: Bank regulation; Bank lending channel; Monetary policy (search for similar items in EconPapers)
JEL-codes: E44 E52 G21 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:138:y:2021:i:c:s0014292121001860

DOI: 10.1016/j.euroecorev.2021.103859

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