Sticky Deposit Rates and Allocative Effects of Monetary Policy

47 Pages Posted: 25 Jan 2021

See all articles by Anne Duquerroy

Anne Duquerroy

Banque de France

Adrien Matray

Princeton University

Farzad Saidi

New York University (NYU)

Date Written: December 2020

Abstract

This paper documents that monetary policy affects credit supply through banks’ cost of funding. Using administrative credit-registry and regulatory bank data, we find that banks can incur an increase in their funding costs of at least 30 basis points before they adjust their lending. For identification, we exploit the existence of regulated-deposit accounts in France whose interest rates are set by the government and are, thus, not directly affected by the monetary-policy rate. When banks’ funding cost increases and they contract their lending, we observe portfolio reallocations consistent with risk shifting: banks that depend on regulated deposits lend less to large firms, and relatively more to small firms and entrepreneurs.

Keywords: Monetary-policy transmission; deposits; credit supply; SMEs; savings

JEL Classification: E23, E32, E44, G20, G21, L14

Suggested Citation

Duquerroy, Anne and Matray, Adrien and Saidi, Farzad, Sticky Deposit Rates and Allocative Effects of Monetary Policy (December 2020). Banque de France Working Paper No. 794, Available at SSRN: https://ssrn.com/abstract=3771345 or http://dx.doi.org/10.2139/ssrn.3771345

Anne Duquerroy (Contact Author)

Banque de France ( email )

Paris
France

Adrien Matray

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

Farzad Saidi

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

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