Does the Lack of Financial Stability Impair the Transmission of Monetary Policy?

Viral Acharya, Bjorn Imbierowicz, Sascha Steffen and Daniel Teichmann

No 26479, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We investigate the transmission of central bank liquidity to bank deposits and loan spreads in Europe over the period from January 2006 to June 2010. We find evidence consistent with an impaired transmission channel due to bank risk. Central bank liquidity does not translate into lower loan spreads for high-risk banks for maturities beyond one year, even as it lowers deposit spreads for both high-risk and low-risk banks. This adversely affects the balance sheets of high-risk bank borrowers, leading to lower payouts, capital expenditures and employment. Overall, our results suggest that banks’ capital constraints at the time of an easing of monetary policy pose a challenge to the effectiveness of the bank-lending channel and the central bank's lender-of-last-resort function.

JEL-codes: E43 E58 G01 G21 (search for similar items in EconPapers)
Date: 2019-11
New Economics Papers: this item is included in nep-ban, nep-eec, nep-mac and nep-mon
Note: CF ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published as Viral V. Acharya & Björn Imbierowicz & Sascha Steffen & Daniel Teichmann, 2020. "Does the lack of financial stability impair the transmission of monetary policy?," Journal of Financial Economics, .

Downloads: (external link)
http://www.nber.org/papers/w26479.pdf (application/pdf)

Related works:
Journal Article: Does the lack of financial stability impair the transmission of monetary policy? (2020)
Working Paper: Does the lack of financial stability impair the transmission of monetary policy? (2019)
Working Paper: Does the lack of financial stability impair the transmission of monetary policy? (2019)
Working Paper: Does Lack of Financial Stability Impair the Transmission of Monetary Policy? (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:26479

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w26479

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().