The Effect of Monetary Policy on Bank Wholesale Funding

53 Pages Posted: 20 Jan 2016 Last revised: 30 Aug 2017

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: 2016-01-01

Abstract

We study how monetary policy affects the funding composition of the banking sector. When monetary tightening reduces the retail deposit supply, banks try to substitute the deposit outflows with wholesale funding to smooth their lending. Banks have varying degrees of accessibility to wholesale funding owing to financial frictions, hence large banks, or those with a 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: bank funding, monetary policy transmission, systemic stability, liquidity regulation, bank lending channel

JEL Classification: E52, E58, G21, G28

Suggested Citation

Choi, Dong Beom and Choi, Hyun-Soo, The Effect of Monetary Policy on Bank Wholesale Funding (2016-01-01). FRB of NY Staff Report No. 759, Available at SSRN: https://ssrn.com/abstract=2718866

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)

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