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Though the monetary policy transmission and financial intermediation literature have highlighted the role of the "bank credit channel" and relationship banking, respectively, the effect of relationship banking on the transmission ...
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Though the monetary policy transmission and financial intermediation literature have highlighted the role of the "bank credit channel" and relationship banking, respectively, the effect of relationship banking on the transmission of monetary policy has not been investigated. In this paper, we study the impact of relationship banking on the transmission of monetary policy. Theoretically, relationship banking could ameliorate or exacerbate the effects of monetary policy shocks. Using unique and comprehensive data on bank-borrower relationships in India, we find that firms that enjoy an exclusive banking relationship are less susceptible to monetary policy shocks than firms that bank with multiple banks.
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We advance an explanation for the delay in the response of the volume of bank loans to innovations in monetary poiicy. Capital requirements may effectively tie the evolution of bank credit to the evolution of bank equity. By uncov...
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We advance an explanation for the delay in the response of the volume of bank loans to innovations in monetary poiicy. Capital requirements may effectively tie the evolution of bank credit to the evolution of bank equity. By uncovering a new mechanism by which shifts in interest rates affect the profitability of the banking sector, and in turn its equity, we find that the resulting movements in the amount of aggregate loans are consistent with the regularities observed in the data.
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This article discusses the immediate and the longer-term future of monetary policy. It first reviews the policies adopted by central banks in the wake of the financial crisis, focusing on balance sheet policies and forward guidanc...
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This article discusses the immediate and the longer-term future of monetary policy. It first reviews the policies adopted by central banks in the wake of the financial crisis, focusing on balance sheet policies and forward guidance, and then discusses the exit from these policies and the associated challenges. Finally, an outlook on the possible long-term design of monetary policy is provided.
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I analyze the impact of the formation of universal banks on corporate investment by looking at the gradual dismantling of the Glass-Steagall Act's separation between commercial and investment banking. Using a sample of US firms an...
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I analyze the impact of the formation of universal banks on corporate investment by looking at the gradual dismantling of the Glass-Steagall Act's separation between commercial and investment banking. Using a sample of US firms and their relationship banks, I show that firms curtail debt issuance and investment after positive shocks to the underwriting capacity of their main bank. This result is driven by unrated firms and is strongest immediately after a shock. These findings suggest that universal banks may pay more attention to large firms providing more underwriting opportunities while exacerbating financial constraints of opaque firms, in line with a shift to a banking model based on transactional lending.
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This research has addressed the pathology of the implementation of monetary and banking policies in Iran and identifying the factors affecting the implementation of these policies in the banking system. In this research, concurren...
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This research has addressed the pathology of the implementation of monetary and banking policies in Iran and identifying the factors affecting the implementation of these policies in the banking system. In this research, concurrent with collecting researches and studies performed about the factors affecting the implementation of policies, by conducting exploratory interviews with 20 experts in the field of policy-making and banking and monetary experts, 36 indicators affecting the implementation of monetary and banking policies in Iran were also identified. Afterwards, in order to fit the "proposed analytical model of implementing monetary and banking policies in Iran", 13 hypotheses were defined. Then, by selecting appropriate statistical sample and distributing the questionnaire among them, the fitness of the model was investigated. Finally, the proposed research model for implementing monetary and banking policies in Iran was fitted and confirmed, and out of 13 hypotheses, 2 were rejected and the rest were confirmed.
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The financial crisis, on the one hand, and the recourse to 'unconventional' monetary policy, on the other, have given a sharp jolt to perceptions of the role and status of central banks. In this paper we start with a brief 'contra...
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The financial crisis, on the one hand, and the recourse to 'unconventional' monetary policy, on the other, have given a sharp jolt to perceptions of the role and status of central banks. In this paper we start with a brief 'contrarian' history of central banks since the Second World War, which presents the Great Moderation and the restricted focus on inflation targeting as a temporary aberration from the norm. We then discuss how recent developments in fiscal and monetary policy have affected the role and status of central banks, notably their relationships with governments, before considering the environment central banks will face in the near and middle future and how they will have to change to address it.
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Purpose: This paper aims to provide fresh empirical evidence on how Federal Open Market Committee (FOMC) monetary policy decisions from a benchmark monetary policy rule affect the profitability of US banking institutions. Design/m...
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Purpose: This paper aims to provide fresh empirical evidence on how Federal Open Market Committee (FOMC) monetary policy decisions from a benchmark monetary policy rule affect the profitability of US banking institutions. Design/methodology/approach: It thereby provides a link between the literature on central bank monetary policy implementation through monetary rules and banks’ profitability. It uses a novel data set from 11,894 US banks, spanning the period 1990 to 2013. Findings: The empirical findings show that deviations of FOMC monetary policy decisions from a number of benchmark linear and non-linear monetary (Taylor type) rules exert a negative and statistically significant impact on banks’ profitability. Originality/value: The results are expected to have substantial implications for the capacity of banking institutions to more readily interpret monetary policy information and accordingly to reshape and hedge their lending behaviour. This would make the monetary policy decision process less noisy and, thus, enhance their capability to attach the correct weight to this information.
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We model a banking union of two countries whose banking sectors differ in their average probability of failure and externalities between the two countries arise from cross-border bank ownership. The two countries face (i) a regula...
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We model a banking union of two countries whose banking sectors differ in their average probability of failure and externalities between the two countries arise from cross-border bank ownership. The two countries face (i) a regulatory (supervisory) decision of which banks are to be shut down before they can go bankrupt, and (ii) a bailout decision of who pays for banks that have failed despite regulatory oversight. Each of these choices can either be taken in a centralized or in a decentralized way. In our benchmark model the two countries always agree on a centralized regulation policy. In contrast, bailout policies are centralized only when international spillovers from cross-border bank ownership are strong, and banking sectors are highly profitable. (c) 2021 Elsevier B.V. All rights reserved.
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Bank competition in Japan is weakening. This study theoretically analyzes the supply side of the bank loan market to examine how this weak banking competition influences the effectiveness of monetary policies. In a Cournot game, t...
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Bank competition in Japan is weakening. This study theoretically analyzes the supply side of the bank loan market to examine how this weak banking competition influences the effectiveness of monetary policies. In a Cournot game, there are efficient banks, and inefficient banks that must pay a risk premium in the call market. Less competitive banks either go out of business or merge with efficient banks. The call rate and risk premium are central banks' policy instruments. This paper's main finding is that, with a few exceptions, the weak competition reduces the effectiveness of monetary policies because concentration decreases the volume of bank loans. However, concentration makes monetary policy via a reduced risk premium more effective when this policy targets inefficient banks that do not exit or merge. In response to lending declines by efficient banks when they exit or merge, inefficient banks increase their lending activity.
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Purpose - This paper aims to examine the role of foreign banks in transmitting global monetary policy shocks to India. Further, the authors try to explore the international bank lending channel and analyze the impact of global mon...
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Purpose - This paper aims to examine the role of foreign banks in transmitting global monetary policy shocks to India. Further, the authors try to explore the international bank lending channel and analyze the impact of global monetary policy on Indian macroeconomic variables.Design/methodology/approach - The authors use a structural break unit root test and structural vector autoregression on monthly data from 1998 to 2018.Findings - The study finds that the global monetary policy is significantly determining foreign banks' lending in India; the evidence of a portfolio re-balancing channel in the process of global monetary policy transmission to the Indian economy; the exchange rate is significantly explaining the foreign bank credit dynamism in India; and evidence of international monetary policy spillover to the Indian economy. Originality/value - This is the first attempt to analyze the role of foreign banks in the transmission of global monetary policy shocks to India, where the literature availability is limited. The finding of ineffective domestic monetary policy on foreign bank lending opens the need for an in-depth and diversified analysis of the role of foreign banks in the transmission of domestic monetary policy.
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