Dynamic Banking with Non-Maturing Deposits
Abstract/Contents
- Abstract
- Bank liabilities include debt with long-term maturities and deposits that typically are not withdrawn for extended periods. This subjects bank liabilities to debt dilution. Our analysis shows that this has major effects for how monetary policy shocks are transmitted to banks and for optimal capital regulation. Interest rate cuts produce protracted increases in bank risk which are stronger in low-rate regimes. Capital regulation addresses debt dilution but is subject to a time-inconsistency problem. We compare Ramsey and Markov-perfect optimal policies and find that regulator commitment significantly impacts optimal bank capital regulation, sometimes in unexpected ways.
Description
| Type of resource | text |
|---|---|
| Date created | September 2, 2021 |
Creators/Contributors
| Author | Jermann, Urban |
|---|---|
| Author | Xiang, Haotian |
| Organizer of meeting | Begenau, Juliane |
| Organizer of meeting | Hansen, Lars Peter |
| Organizer of meeting | Hebert, Ben |
| Organizer of meeting | Piazzesi, Monika |
Subjects
| Subject | debt maturity |
|---|---|
| Subject | dilution |
| Subject | capital regulation |
| Subject | monetary policy |
| Genre | Text |
| Genre | Working paper |
| Genre | Grey literature |
Bibliographic information
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- User agrees that, where applicable, content will not be used to identify or to otherwise infringe the privacy or confidentiality rights of individuals. Content distributed via the Stanford Digital Repository may be subject to additional license and use restrictions applied by the depositor.
- License
- This work is licensed under a Creative Commons Attribution 4.0 International license (CC BY).
Preferred citation
- Preferred citation
- Jermann, U. and Xiang, H. (2022). Dynamic Banking with Non-Maturing Deposits. Stanford Digital Repository. Available at https://purl.stanford.edu/zw725tc4669
Collection
SITE Conference 2021
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