Monetary Policy and Funding Spreads

Anella Munro and Benjamin Wong

No AN2014/07, Reserve Bank of New Zealand Analytical Notes series from Reserve Bank of New Zealand

Abstract: Fluctuations in the margins banks paid (over risk-free interest rates) on their funding costs have been a significant factor since the financial crisis of 2008/09. This paper uses a model to analyse the response of New Zealand’s monetary policy to such fluctuations since 1993, On average, the 90 day bill rate moved seven times as much as the initial shock to funding cost margins.

Pages: 16 p
Date: 2014-12
New Economics Papers: this item is included in nep-ban, nep-mac and nep-mon
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