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Does the deposits channel work under a low interest rate environment?

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  • Sá, Ana Isabel
  • Jorge, José

Abstract

According to the deposits channel of monetary policy, central banks can influence the deposits holdings and the loan supply by changing the policy rate. This paper discusses the generality of this channel and shows that low interest rates may turn this channel off. This result contributes to the literature on unintended effects of monetary policy and banks’ profitability in a low interest rate environment.

Suggested Citation

  • Sá, Ana Isabel & Jorge, José, 2019. "Does the deposits channel work under a low interest rate environment?," Economics Letters, Elsevier, vol. 185(C).
    • Handle: RePEc:eee:ecolet:v:185:y:2019:i:c:s0165176519303702
    DOI: 10.1016/j.econlet.2019.108736
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    References listed on IDEAS

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    Cited by:

    1. Nimrod Segev & Sigal Ribon & Michael Kahn & Jakob Haan, 2024. "Low Interest Rates and Banks’ Interest Margins: Does Deposit Market Concentration Matter?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 65(2), pages 189-218, June.
    2. Caetité, Alex Nery & Sousa, Almir Ferreira de & Savoia, José Roberto Ferreira & Bucchi, Wadico Waldir & Garcia, Fabio Gallo, 2022. "Does the deposit channel of monetary policy work in a high-interest rate environment?," Journal of Banking & Finance, Elsevier, vol. 145(C).
    3. Raftis, Achilleas & Karpetis, Christos & Papadamou, Stephanos & Spyromitros, Eleftherios, 2024. "Monetary winds of change: Exploring the link between policy shifts and bank profitability in developed and emerging European markets," Global Finance Journal, Elsevier, vol. 59(C).
    4. Matthew Schaffer & Nimrod Segev, 2022. "The deposits channel revisited," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(2), pages 450-458, March.

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    More about this item

    Keywords

    Deposits channel; Monetary policy; Low interest rates; Bank profitability;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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