Monetary Transmission through Bank Securities Portfolios

John Krainer and Pascal Paul

No 2023-18, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: We study the transmission of monetary policy through bank securities portfolios for the United States using granular supervisory data on bank securities, hedging positions, and corporate credit. We find that banks that experienced larger market value losses on their securities during the monetary tightening cycle in 2022 extended relatively less credit to firms. Such a spillover effect was stronger for (i) available-for sale securities, (ii) unhedged securities, (iii) low-capitalized banks, and (iv) banks that have to include unrealized gains and losses on their available-for-sale securities in their regulatory capital. Our findings provide evidence for a forceful transmission channel of monetary policy that is shaped by the regulatory framework of the banking system.

Keywords: banks; firms; securities; monetary policy (search for similar items in EconPapers)
JEL-codes: E32 E43 E44 E51 E52 E60 G21 G32 (search for similar items in EconPapers)
Pages: 60
Date: 2023-07-26
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (2)

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Working Paper: Monetary Transmission Through Bank Securities Portfolios (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:96512

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DOI: 10.24148/wp2023-18

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