Affiliation:
1. SNU Business School, Seoul National University, Seoul 08826, Korea;
2. College of Business, Korea Advanced Institute of Science and Technology, Seoul 02455, Korea
Abstract
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. This paper was accepted by Tyler Shumway, finance.
Publisher
Institute for Operations Research and the Management Sciences (INFORMS)
Subject
Management Science and Operations Research,Strategy and Management
Cited by
10 articles.
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