Banks’ exposure to interest rate risk and the transmission of monetary policy
Name
SSRN-id2220360.pdf
Description
Accepted version
Size
730.73 KB
Format
Adobe PDF
Checksum (MD5)
1766f04652f47707c959ffcfed61e530
Author(s)
Gomez, Matthieu
Landier, Augustin
Sraer, David
Thesmar, David
Date Issued
2021
Journal
Journal of Monetary Economics
Publisher
Elsevier BV
Version
Author's final manuscript
Abstract
© 2020 Elsevier B.V. The cash-flow exposure of banks to interest rate risk, or income gap, is a significant determinant of the transmission of monetary policy to bank lending and real activity. When the Fed Funds rate rises, banks with a larger income gap generate stronger earnings and contract their lending by less than other banks. This finding is robust to controlling for factors known to affect the transmission of monetary policy to bank lending. It also holds on loan-level data, even when we control for firm-specific credit demand. When monetary policy tightens, firms borrowing from banks with a larger income gap reduce their investment by less than other firms.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-NonCommercial-NoDerivs License
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1016/J.JMONECO.2020.03.011
