The effect of bank ownership and deposit insurance on monetary policy transmission

Natalia Andries and Steve Billon

Journal of Banking & Finance, 2010, vol. 34, issue 12, 3050-3054

Abstract: In this paper we develop a theoretical model with a representative bank whose ownership is shared between state and private sector. The bank faces a risk of failure and provides private and public explicit deposit insurance. Banks owned to a larger extent by the government are more able to counteract a restrictive monetary policy because of their capacity to raise additional volume of deposits. Therefore, the greater the state's share in the bank ownership, the less the impact of a monetary tightening on the level of loan supply.

Keywords: State-owned; banks; Deposit; insurance; Monetary; policy; transmission (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:34:y:2010:i:12:p:3050-3054

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