Monetary Policy Transmission Through Online Banks

Isil Erel, Jack Liebersohn, Constantine Yannelis and Samuel Earnest

No 31380, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Financial technology has the potential to alter the transmission of monetary policy by lowering search costs and expanding banking markets. This paper studies the reaction of online banks to changes in the federal funds rate. We find that a 100 basis points increase in the federal funds rate leads to a 30 basis points larger increase in the deposit rates of online banks relative to traditional banks. Consistent with the rate movements, online bank deposits experience inflows, while traditional banks experience outflows. Results are similar across markets with differing competitiveness and demographics, but vary with the stickiness of depositors.

JEL-codes: E52 E58 G21 G23 G28 (search for similar items in EconPapers)
Date: 2023-06
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fdg, nep-mon and nep-pay
Note: CF ME
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