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Why bank capital matters for monetary policy

Leonardo Gambacorta () and Hyun Song Shin

No 558, BIS Working Papers from Bank for International Settlements

Abstract: One aim of post-crisis monetary policy has been to ease credit conditions for borrowers by unlocking bank lending. We find that bank equity is an important determinant of both the bank's funding cost and its lending growth. In a cross-country bank-level study, we find that a 1 percentage point increase in the equity-to-total assets ratio is associated with a 4 basis point reduction in debt financing and with a 0.6 percentage point increase in annual loan growth.

Keywords: Bank capital; book equity; monetary transmission mechanisms; funding; bank lending (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-ifn and nep-mon
Date: 2016-04
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Journal Article: Why bank capital matters for monetary policy (2018) Downloads
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