The effect of bank ownership and deposit insurance on monetary policy transmission revisited: The role of precautionary savings

Jean P. Sepúlveda and Marcos Vergara

Finance Research Letters, 2022, vol. 50, issue C

Abstract: We generalize the Model of Andries and Billon (2010) by allowing for a general type of consumer‘s preferences that allows the presence of prudent behavior. Having precautionary savings changes the model’s implication that the existence of public banks diminishes the effectiveness of monetary policy. Indeed, the new setup shows that the existence of public banks may increase or decrease the effect of monetary policy on the level of loan supply depending upon the degree of relative risk aversion.

Keywords: Public banks; Monetary policy; Prudence (search for similar items in EconPapers)
JEL-codes: D14 D81 E52 G22 G32 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004512

DOI: 10.1016/j.frl.2022.103255

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