Bank behavior, incomplete interest rate pass-through, and the cost channel of monetary policy transmission

Hülsewig, Oliver; Mayer, Eric; Wollmershäuser, Timo

doi:10.1016/j.econmod.2009.06.007

Cited by 71 publications

(71 citation statements)

References 26 publications

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“…Modeling loan demand based on the Dixit-Stiglitz approach of bundling varieties is a reduced form for modeling the credit market which simplifies aggregation. Gerali et al (2010) and Huelsewig et al (2009) take a similar shortcut. Assuming that the representative firm demands a CES-basket of loan varieties is equivalent to setting up the model such that a continuum of firms takes a single homogeneous loan from a particular bank under a discrete choice approach (see Anderson et al (1987) and Bruggemann et al (2012)) 4 .…”

Section: Model Setupmentioning

confidence: 99%

Cross-Border Banking, Bank Market Structures and Market Power: Theory and Cross-Country Evidence

Bremus

2013

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in

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Section: Model Setupmentioning

confidence: 99%

Cross-Border Banking, Bank Market Structures and Market Power: Theory and Cross-Country Evidence

Bremus

2013

SSRN Journal

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“…On the other hand, financial intermediation increases the propagation of supply shocks originating in credit markets, which are linked to asset prices and the balancesheet conditions of borrowers. In a related paper, Hulsewig, Mayer, and Wollmershaeuser (2006) study the role of banks in the "cost channels" of monetary policy. They assume that banks extend Gilchrist (1999).…”

Section: A Selected Review Of the Literaturementioning

confidence: 99%

Business Cycle Effects of Credit Shocks in a DSGE Model with Firm Defaults

Pesaran

2016

SSRN Journal

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This paper proposes a theoretical framework to analyze the relationship between credit shocks, firm defaults and volatility, and to study the impact of credit shocks on business cycle dynamics. Firms are identical ex ante but differ ex post due to different realizations of firm-specific technology shocks, possibly leading to default by some firms. The paper advances a new modelling approach for the analysis of firm defaults and financial intermediation that takes account of the financial implications of such defaults for both households and banks. Results from a calibrated version of the model suggest that, in the steady state, a firm's default probability rises with its leverage ratio and the level of uncertainty in the economy. A positive credit shock, defined as a rise in the loan-todeposit ratio, increases output, consumption, hours and productivity, and reduces the spread between loan and deposit rates. The effects of the credit shock tend to be highly persistent, even without price rigidities and habit persistence in consumption behavior. JEL classification: E32, E44, G21 Bank classification: Business fluctuations and cycles; Economic models; Credit and credit aggregates; Financial institutions RésuméLes auteurs proposent un modèle théorique pour l'analyse de la relation entre les chocs de crédit, les défaillances d'entreprises et la volatilité, ainsi que pour l'étude des effets de ces chocs sur la dynamique du cycle économique. Dans ce modèle, des entreprises identiques ex ante se différencient ex post en réponse aux chocs technologiques réalisés, qui sont propres à chaque entreprise et peuvent provoquer sa défaillance. Le nouveau modèle employé par les auteurs pour examiner les défaillances des firmes et l'intermédiation financière tient compte des conséquences financières de ces défaillances à la fois sur les ménages et sur les banques. Les résultats tirés d'une version étalonnée du modèle indiquent qu'à l'équilibre de long terme, la probabilité de défaut d'une entreprise augmente avec son ratio de levier et le degré d'incertitude dans l'économie. Un choc de crédit positif -à savoir une hausse du ratio des prêts aux dépôts -accroît la production, la consommation, le nombre d'heures travaillées et la productivité et réduit l'écart entre le taux prêteur et le taux de rémunération des dépôts. Les retombées du choc de crédit tendent à perdurer longtemps même en l'absence de rigidité des prix et de persistance des habitudes de consommation.

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“…Also, in a highly oligopolistic (concentrated) banking market, banks may cause interest rates to adjust asymmetrically to an increase or a decrease in the official rate. The asymmetric adjustment of interest rates can be explained using two competing hypotheses (Huslsewig, et al, 2009) . Firstly the collusive behaviour hypothesis which suggests that deposit rates will be rigid upward when the official rate is increased, while the lending rates will be rigid downward in the case of a decrease in the official rate.…”

Section: Factors Affecting Interest Ratesmentioning

confidence: 99%

Interest Rate Transmission Effect on Money Supply: The Nigerian Experience

Ebiringa¹

2012

jpag

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This paper investigates the effect of interest indices on money supply. The motivation is to ensure stability in money supply through sustainable interest rate management. The period 1990-2007 was covered. The Eviews software was used to carry out autoregressive analysis on the variable as well as an assessment of the effects on interest rate indices on money supply. The results among others show that minimum rediscount rate and savings rate have made significant positive impact on money supply. On the other hand, lending rate has made insignificant negative impact on money supply.Based on the above results the conclusion of the study the inability of the monetary authority to narrow the gap between saving and lending rate remains a key to the problem of instability in money supply, hence concerted effort must by made to strengthen the capacity of regulatory authorities to use market based options monitor and control periodic volatility in money supply through an effective interest rate regimes.

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Bank behavior, incomplete interest rate pass-through, and the cost channel of monetary policy transmission

Cited by 71 publications

References 26 publications

Cross-Border Banking, Bank Market Structures and Market Power: Theory and Cross-Country Evidence

Cross-Border Banking, Bank Market Structures and Market Power: Theory and Cross-Country Evidence

Business Cycle Effects of Credit Shocks in a DSGE Model with Firm Defaults

Interest Rate Transmission Effect on Money Supply: The Nigerian Experience

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