Do highly liquid banks insulate their lending behavior?

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Title: Do highly liquid banks insulate their lending behavior?
Authors: Kapoor, Supriya
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Date: 9-Sep-2017
Abstract: The role of banks in the transmission of monetary policy has been of significance lately. We aim to analyse the bank lending behaviour during changes in monetary policy. We test for loan supply shifts by segregating banks based on their liquidity along with size and capital ratio. This paper employs uninsured, non-reservable liabilities such as time deposits and investigates whether banks are able to insulate themselves during a monetary policy change. We find that the loan supply shock can be neutralized post monetary policy changes. Furthermore, the less liquid and small banks are unable to carry out such operations and are more affected by monetary shocks. This has important implication in the working of commercial banks and effects of monetary policy.
Type of material: Working Paper
Publisher: University College Dublin. Geary Institute
Keywords: Bank lending channelMonetary policyLiquidityTime deposits
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Language: en
Status of Item: Not peer reviewed
Appears in Collections:Geary Institute Working Papers

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