Banks Exposure to Interest Rate Risk and The Transmission of Monetary Policy
David Sraer () and
No 13-438, TSE Working Papers from Toulouse School of Economics (TSE)
We show empirically that banks' exposure to interest rate risk, or income gap, plays a crucial role in monetary policy transmission. In a first step, we show that banks typically retain a large exposure to interest rates that can be predicted with income gap. Secondly, we show that income gap also predicts the sensitivity of bank lending to interest rates. Quantitatively, a 100 basis point increase in the Fed funds rate leads a bank at the 75th percentile of the income gap distribution to increase lending by about 1.6 percentage points annually relative to a bank at the 25th percentile.
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Working Paper: Banks' exposure to interest rate risk and the transmission of monetary policy (2016)
Working Paper: Banks Exposure to Interest Rate Risk and The Transmission of Monetary Policy (2014)
Working Paper: Banks Exposure to Interest Rate Risk and The Transmission of Monetary Policy (2013)
Working Paper: Banks' Exposure to Interest Rate Risk and The Transmission of Monetary Policy (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:27663
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