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Banks’ Regulatory Buffers, Liquidity Networks and Monetary Policy Transmission

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  • Christian Merkl
  • Stéphanie Stolz

Abstract

Based on a quarterly regulatory dataset for German banks from 1999 to 2004, this paper analyzes the effects of banks’ regulatory capital on the transmission of monetary policy in a system of liquidity networks. The dynamic panel regression results provide evidence in favor of the bank capital channel theory. Banks holding less regulatory capital and less interbank liquidity react more restrictively to a monetary tightening than their peers.

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File URL: https://www.ifw-members.ifw-kiel.de/publications/banks2019-regulatory-buffers-liquidity-networks-and-monetary-policy-transmission-1/kap1303.pdf
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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1303.

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Length: 46 pages
Date of creation: Nov 2006
Date of revision:
Handle: RePEc:kie:kieliw:1303

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Keywords: monetary policy transmission; bank lending channel; bank capital channel; liquidity networks;

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Citations

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Cited by:
  1. Claudia M. Buch & Esteban Prieto, 2012. "Do Better Capitalized Banks Lend Less? Long-Run Panel Evidence from Germany," IAW Discussion Papers, Institut für Angewandte Wirtschaftsforschung (IAW) 84, Institut für Angewandte Wirtschaftsforschung (IAW).
  2. Vítor Castro, 2013. "Macroeconomic Determinants of the Credit Risk in the Banking System: The Case of the GIPSI," GEMF Working Papers, GEMF - Faculdade de Economia, Universidade de Coimbra 2013-12, GEMF - Faculdade de Economia, Universidade de Coimbra.
  3. Jugnu Ansari & Ashima Goyal, 2014. "Banks competition, managerial efficiency and the interest rate pass-through in India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2014-007, Indira Gandhi Institute of Development Research, Mumbai, India.
  4. Holl, Dorothee & Schertler, Andrea, 2009. "Why do savings banks transform sight deposits into illiquid assets less intensively than the regulation allows?," Discussion Paper Series 2: Banking and Financial Studies, Deutsche Bundesbank, Research Centre 2009,05, Deutsche Bundesbank, Research Centre.
  5. Memmel, Christoph & Raupach, Peter, 2010. "How do banks adjust their capital ratios?," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 19(4), pages 509-528, October.
  6. Philipp Engler & Terhi Jokipii & Christian Merkl & Pablo Rovira Kaltwasser & Lúcio Vinhas de Souza, 2007. "The effect of capital requirement regulation on the transmission of monetary policy: evidence from Austria," Empirica, Springer, Springer, vol. 34(5), pages 411-425, December.
  7. Dimitrios P. Louzis & Aggelos T. Vouldis & Vasilios L. Metaxas, 2010. "Macroeconomic and bank-specific determinants of non-performing loans in Greece: a comparative study of mortgage, business and consumer loan portfolios," Working Papers, Bank of Greece 118, Bank of Greece.

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