Bank Lending, Monetary Policy Transmission, and Interest on Excess Reserves: A FAVAR Analysis

Chetan Dave, Scott Dressler () and Lei Zhang ()

No 2020-6, Working Papers from University of Alberta, Department of Economics

Abstract: Has paying interest on excess reserves (IOER) impacted monetary policy transmission? We employ a factor augmented VAR (i.e. FAVAR) to analyze a traditional bank lending channel (BLC) as well as a potential reserves channel. Our main results are: (i) the bank-lending response to an exogenous monetary policy innovation in the Federal Funds rate (i.e. the BLC) remains active but smaller than pre-2008 measures; (ii) the bank-lending response to any IOER-based liquidity innovations (i.e. the reserves channel) either mimics the BLC or is largely insignificant. These results provide little evidence that IOER has significantly impacted bank lending or monetary transmission.

Keywords: Bank Lending Channel; FAVAR; IOER; Monetary Policy (search for similar items in EconPapers)
JEL-codes: C32 E51 E52 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2020-05-28
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac, nep-mon and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://sites.ualberta.ca/~econwps/2020/wp2020-06.pdf Full text (application/pdf)

Related works:
Working Paper: Bank Lending, Monetary Policy Transmission, and Interest on Excess Reserves: a FAVAR Analysis (2020)
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:ris:albaec:2020_006

Access Statistics for this paper

More papers in Working Papers from University of Alberta, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Joseph Marchand ().