The effect of bank ownership and deposit insurance on monetary policy transmission

Natalia Andriès and Steve Billon ()
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Natalia Andriès: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique
Steve Billon: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique

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Abstract: In this paper we develop a theoretical model with a representative bank whose ownership is shared between state and private sector. The bank faces a risk of failure and provides private and public explicit deposit insurance. Banks owned to a larger extent by the government are more able to counteract a restrictive monetary policy because of their capacity to raise additional volume of deposits. Therefore, the greater the state's share in the bank ownership, the less the impact of a monetary tightening on the level of loan supply.

Keywords: State-owned banks; deposit insurance; monetary policy transmission (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (14)

Published in Journal of Banking and Finance, 2010, 34 (12), pp.3050-3054. ⟨10.1016/j.jbankfin.2010.07.010⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00908863

DOI: 10.1016/j.jbankfin.2010.07.010

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