A Cross-Country Exploration of the Deposit Channel of Monetary Policy in Emerging Market Economies

Carlos Giraldo, Iader Giraldo, Jose E. Gomez-Gonzalez and Jorge M Uribe
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Carlos Giraldo: Fondo Latinoamericano de Reservas - FLAR
Jose E. Gomez-Gonzalez: Department of Finance, Information Systems, and Economics, City University of New York – Lehman College
Jorge M Uribe: Universitat Oberta de Catalunya

Documentos de trabajo from FLAR

Abstract: Deposits are the primary source of funding for commercial banks, but their role in the transmission of monetary policy remains relatively understudied, particularly in emerging and developing economies. This paper examines whether monetary policy affects both the growth of bank deposits and the spread between policy rates and deposit remuneration. Using a panel of more than 1,600 banks across 52 countries between 1996 and 2021, we find that higher policy rates are associated with slower deposit growth and wider deposit spreads. These relationships remain robust after accounting for macroeconomic conditions, bank-specific characteristics, and the banking-sector structure. These results are consistent with the view that banks do not fully pass policy rate increases through to depositors, allowing funding spreads to widen during periods of monetary tightening. By providing broad cross-country evidence from emerging economies, this paper highlights the importance of deposit markets for monetary transmission and suggests that the liability side of bank balance sheets deserves greater attention in both research and policy discussions.

Keywords: Monetary Policy Transmission; Deposit Channel; Bank Deposits; Emerging Markets (search for similar items in EconPapers)
JEL-codes: E44 E52 G21 (search for similar items in EconPapers)
Pages: 26
Date: 2026-07-18
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Persistent link: https://EconPapers.repec.org/RePEc:col:000566:023352

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