The Tradeoff between Monetary Policy and Bank Stability

Martien Lamers, Frederik Mergaerts, Elien Meuleman and Rudi Vander Vennet

International Journal of Central Banking, 2019, vol. 15, issue 2, 1-42

Abstract: This paper investigates the transmission of monetary policy to systemic risk of euro-area and U.S. banks between 2008 and 2015. Using market measures of systemic risk and a VAR to obtain monetary policy shocks, we find that accommodative policy generally has a positive effect on bank stability in the euro area but a negative effect in the United States. Different transmission channels are at play: in the euro area the effect works mainly through a stealth recapitalization channel, while in the United States the effect is due to risk-shifting. Moreover, transmission of monetary policy differs across bank business models.

JEL-codes: E52 G21 G32 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (12)

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Related works:
Working Paper: The trade-off between monetary policy and bank stability (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2019:q:2:a:1

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