Intermediation Markups and Monetary Policy Passthrough

61 Pages Posted: 14 Dec 2016 Last revised: 1 Oct 2017

See all articles by Semyon Malamud

Semyon Malamud

Ecole Polytechnique Federale de Lausanne; Centre for Economic Policy Research (CEPR); Swiss Finance Institute

Andreas Schrimpf

CREATES - Aarhus University; Bank for International Settlements (BIS) - Monetary and Economic Department

Date Written: September 30, 2017


We introduce intermediation frictions into the classical monetary model with fully flexible prices. Trade in financial assets occurs through intermediaries who bargain over a full set of state-contingent claims with their customers. Monetary policy is redistributive and affects intermediaries' ability to extract rents. This opens up a new transmission channel to rates in the wider economy. We find that the pass-through efficiency of quantitative easing (QE) and tightening (QT) policies depends crucially on the anticipated relationship between future monetary policy and future stock market returns (the 'Central Bank Put').

The strength of the Central Bank Put affects the room for maneuver in monetary policy: If it is too weak, balance sheet policies become inefficient. When the Central Bank Put is very strong, however, monetary policy may even be destabilizing and lead to greater frequency of market tantrums.

Keywords: Monetary Policy, Stock Returns, Intermediation, Market Frictions

JEL Classification: G12, E52, E40, E44

Suggested Citation

Malamud, Semyon and Schrimpf, Andreas and Schrimpf, Andreas, Intermediation Markups and Monetary Policy Passthrough (September 30, 2017). Swiss Finance Institute Research Paper No. 16-75, Available at SSRN: or

Semyon Malamud (Contact Author)

Ecole Polytechnique Federale de Lausanne ( email )

Lausanne, 1015

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4

Andreas Schrimpf

CREATES - Aarhus University ( email )

School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel

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