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Sticky Deposit Rates and Allocative Effects of Monetary Policy

Anne Duquerroy (), Adrien Matray and Saidi Farzad

Working papers from Banque de France

Abstract: This paper documents that monetary policy affects credit supply through banks’ cost of funding. Using administrative credit-registry and regulatory bank data, we find that banks can incur an increase in their funding costs of at least 30 basis points before they adjust their lending. For identification, we exploit the existence of regulated-deposit accounts in France whose interest rates are set by the government and are, thus, not directly affected by the monetary-policy rate. When banks’ funding cost increases and they contract their lending, we observe portfolio reallocations consistent with risk shifting: banks that depend on regulated deposits lend less to large firms, and relatively more to small firms and entrepreneurs.

Keywords: Sticky; Deposit; Rates; and; Allocative; Effects; of; Monetary; Policy (search for similar items in EconPapers)
JEL-codes: E23 E32 E44 G20 G21 L14 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2020
New Economics Papers: this item is included in nep-ban and nep-mac
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https://publications.banque-france.fr/sites/defaul ... ocuments/wp794_0.pdf

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Working Paper: Sticky Deposit Rates and Allocative Effects of Monetary Policy (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:794

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