Bank net worth and frustrated monetary policy

• 成果类型: Article
• 署名作者: Zentefis, Alexander K.
• 署名单位: Yale University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.06.007
• 发表日期: 2020
• 页码: 687-699
• 关键词: Banking; monetary policy; monopolistic competition

摘要

I present a model in which bank net worth determines both loan market competition and monetary transmission to firm borrowing rates. In the model, banks are local monopolists for borrowers near them. When they are flush with equity, banks expand their lending, compete for customers at the edges of their markets, and pass through changes in the monetary policy rate to their loan rates. When they lose substantial equity, banks consolidate, retreat from rivalry, and frustrate monetary transmission. The model explains why interest rate pass-through weakens after financial crises. Its predictions are consistent with several facts about bank-to-firm lending. (C) 2020 Elsevier B.V. All rights reserved.