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- Title
The Effect of Monetary Policy on Bank Wholesale Funding.
- Authors
Choi, Dong Beom; Choi, Hyun-Soo
- 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.
- Subjects
BANKING policy; MONETARY policy; FINANCE; WHOLESALE trade; LOANS
- Publication
Management Science, 2021, Vol 67, Issue 1, p388
- ISSN
0025-1909
- Publication type
Article
- DOI
10.1287/mnsc.2019.3463