Bank Regulation and Monetary Policy Effectiveness: Evidence from the U.S. States Liberalization
نویسنده
چکیده
This paper studies the impact of geographic banking deregulation on the effectiveness of monetary policy. State-level removal of restrictions on interstate banking strengthened the effect of monetary policy on bank lending. This effect was driven by small banks affiliated with bank holding companies. Following interstate deregulation affiliated banks reallocate assets towards securities and away from lending after a contractionary monetary policy shock. Moreover, the least liquid banks are most strongly affected, indicating that interstate banking deregulation strengthened the bank lending channel of monetary policy. ∗Department of Economics, Michigan State University, [email protected]
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