The Effect of Monetary Policy on Bank Wholesale Funding

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We study how monetary policy affects the funding composition of the banking sector. When monetary tightening reduces the supply of retail deposits, banks attempt to substitute wholesale funding for deposit outflows to smooth their lending. Because of financial frictions, banks have varying degrees of access to wholesale funding. Therefore, large banks, or those with greater reliance on wholesale funding, increase their wholesale funding more. Consequently, monetary tightening increases both the reliance on and the concentration of wholesale funding within the banking sector. Our findings also suggest that liquidity requirements could bolster monetary policy transmission through the bank lending channel. Copyright: © 2020 INFORMS.
Publisher
Institute for Operations Research and the Management Sciences
Issue Date
2021-01
Language
English
Article Type
Article
Citation

Management Science, v.67, no.1, pp.388 - 416

ISSN
0025-1909
DOI
10.1287/mnsc.2019.3463
URI
http://hdl.handle.net/10203/280969
Appears in Collection
MT-Journal Papers(저널논문)
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