The Effect of Monetary Policy on Bank Wholesale Funding

84 Pages Posted: 12 Jan 2016 Last revised: 29 Jul 2019

See all articles by Dong Beom Choi

Dong Beom Choi

Seoul National University - Business School

Hyun-Soo Choi

KAIST College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: June 20, 2019

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. Due to 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.

Keywords: Wholesale Funding Substitutions, Cross-sectional Heterogeniety, Liquidity Regulation

JEL Classification: G21, G28, E44, D12

Suggested Citation

Choi, Dong Beom and Choi, Hyun-Soo, The Effect of Monetary Policy on Bank Wholesale Funding (June 20, 2019). Available at SSRN: https://ssrn.com/abstract=2713538 or http://dx.doi.org/10.2139/ssrn.2713538

Dong Beom Choi (Contact Author)

Seoul National University - Business School ( email )

Seoul
Korea, Republic of (South Korea)

Hyun-Soo Choi

KAIST College of Business ( email )

85 Hoegiro, Dongdaemoon-gu
Seoul
Korea, Republic of (South Korea)
8229583592 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
314
Abstract Views
1,589
rank
96,147
PlumX Metrics