Monetary Transmission through Bank Securities Portfolios

Daniel L. Greenwald, 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 using granular supervisory data on U.S. bank securities, hedging positions, and corporate credit. Banks that experienced larger losses on their securities during the 2022-2023 monetary tightening cycle extended less credit to firms. This spillover effect was stronger for available-for-sale securities, unhedged securities, and banks that must include unrealized gains and losses in their regulatory capital. A structural model, disciplined by our cross-sectional regression estimates, shows that interest rate transmission is stronger the more banks are required to adjust their regulatory capital for unrealized value changes of securities.

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: 90
Date: 2024-05-01
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
Note: Original publication date: 2023/07/26.
References: View references in EconPapers View complete reference list from CitEc
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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