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The effect of bank ownership and deposit insurance on monetary policy transmission revisited: The role of precautionary savings

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  • Sepúlveda, Jean P.
  • Vergara, Marcos

Abstract

We generalize the Model of Andries and Billon (2010) by allowing for a general type of consumer‘s preferences that allows the presence of prudent behavior. Having precautionary savings changes the model’s implication that the existence of public banks diminishes the effectiveness of monetary policy. Indeed, the new setup shows that the existence of public banks may increase or decrease the effect of monetary policy on the level of loan supply depending upon the degree of relative risk aversion.

Suggested Citation

  • Sepúlveda, Jean P. & Vergara, Marcos, 2022. "The effect of bank ownership and deposit insurance on monetary policy transmission revisited: The role of precautionary savings," Finance Research Letters, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004512
    DOI: 10.1016/j.frl.2022.103255
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    References listed on IDEAS

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    1. Andries, Natalia & Billon, Steve, 2010. "The effect of bank ownership and deposit insurance on monetary policy transmission," Journal of Banking & Finance, Elsevier, vol. 34(12), pages 3050-3054, December.
    2. Natalia Andriès & Steve Billon, 2010. "The effect of bank ownership and deposit insurance on monetary policy transmission," Post-Print halshs-00908863, HAL.
    3. Szpiro, George G, 1986. "Measuring Risk Aversion: An Alternative Approach," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 156-159, February.
    4. Szpiro, George G. & Outreville, Jean-Francois, 1988. "Relative risk aversion around the world : Further results," Journal of Banking & Finance, Elsevier, vol. 6(1, Supple), pages 127-128, January.
    5. Steve Billon & Natalia Billon-Andries, 2010. "The effect of bank ownership and deposit insurance on monetary policy transmission," Post-Print halshs-00482991, HAL.
    6. L. Eeckhoudt & C. Gollier & H. Schlesinger, 2005. "Economic and financial decisions under risk," Post-Print hal-00325882, HAL.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Public banks; Monetary policy; Prudence;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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