A central proposition in research on the role of banks in the transmission mechanism is that monetary policy imparts a direct impact on deposits and that deposits act as the driving force of bank lending. This paper argues that the emphasis on policy-induced changes in deposits is misplaced. A...

A central proposition in research on the role that banks play in the transmission mechanism is that monetary policy imparts a direct impact on deposits and that deposits, insofar as they constitute the supply of loanable funds, act as the driving force of bank lending. This paper argues that the...

We study how monetary policy affects the funding composition of the banking sector. When monetary tightening reduces the supply of retail deposits, banks attempt to substitute wholesale funding for deposit outflows to smooth their lending. Due to financial frictions, banks have varying degrees...

We develop a New Keynesian model where all payments between agents require bank deposits through deposits-in-advance constraints, bank deposits are created through disbursement of bank loans, and banks face a convex lending cost. At the zero lower bound on deposit rates (ZLBD), changes in policy...

Accurate assessments of bank deposit market power are essential for antitrust and monetary policy. Regulators and researchers have traditionally measured market power assuming all consumers consider every bank operating in a given geographic region. However, these measures are generally biased...

We develop a New Keynesian model where all payments between agents require bank deposits, bank deposits are created through disbursement of bank loans, and banks face convex lending costs. At the zero lower bound on deposit rates (ZLBD), changes in policy rates affect activity through both real...

In this paper we relate a bank's choice between retail and wholesale liabilities to real economic uncertainty and the resulting volatility of bank loan volumes. We argue that since the volume of retail deposits is slow and costly to adjust to shocks in the volume of bank assets, banks facing...

The paper presents the first empirical study of the relation between bank loan volume volatility and bank retail and wholesale liabilities. We argue that since the volume of retail deposits is inflexible, banks facing volatile loan demand tend to fund loans with larger shares of wholesale rather...

Drechsler, Savov, and Schnabl (2017) present a novel reformulation of the bank lending channel of monetary transmission based on market power in local deposits markets, which they term the deposits channel. In this paper we perform a successful narrow replication. We then further their study by...

This paper documents that monetary policy affects credit supply through banks’ cost of funding. Using administrative credit-registry and regulatory bank data, we find that banks can incur an increase in their funding costs of at least 30 basis points before they adjust their lending. For...