Title

Sticky Deposit Rates and Allocative Effects of Monetary Policy

Author(s)

Anne Duquerroy Anne Duquerroy (Banque de France)

Adrien Matray Adrien Matray (Princeton University)

Farzad Saidi Farzad Saidi (Boston University and CEPR)

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.

Creation Date

2020-12

Section URL ID

Paper Number

280

URL

https://gceps.princeton.edu/wp-content/uploads/2021/07/280_Matray.pdf

File Function

Jel

E23, E32, E44, G20, G21, L14

Keyword(s)

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

Suppress

false

Series

3