The Impact of the Deposit Channel on the International Transmission of Monetary Shocks

51 Pages Posted: 11 Oct 2021 Last revised: 4 May 2022

See all articles by Sergey Sarkisyan

Sergey Sarkisyan

The Wharton School, University of Pennsylvania

Tasaneeya Viratyosin

University of Pennsylvania

Date Written: May 3, 2022

Abstract

What role do deposits play in the international transmission of US monetary policy shocks? We find that the US monetary shocks are transmitted internationally through banks' deposits. Specifically, we document that after a 1 p.p. unexpected increase in the policy rate, global banks increase deposit spreads by 0.2 p.p. and experience a 3% decline in deposit growth. Consequently, global banks increase net transfers from foreign branches by 40.4% to finance lending. It allows them to reduce lending growth by half as much as domestic banks per percent of deposit outflow. Finally, global banks contract foreign lending growth by 1.3%.

Keywords: International transmission, monetary policy, deposit channel, banking

JEL Classification: E52, F23, F34, G21

Suggested Citation

Sarkisyan, Sergey and Viratyosin, Tasaneeya, The Impact of the Deposit Channel on the International Transmission of Monetary Shocks (May 3, 2022). Jacobs Levy Equity Management Center for Quantitative Financial Research Paper, Available at SSRN: https://ssrn.com/abstract=3938284 or http://dx.doi.org/10.2139/ssrn.3938284

Sergey Sarkisyan (Contact Author)

The Wharton School, University of Pennsylvania ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

Tasaneeya Viratyosin

University of Pennsylvania

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