Abstract: We propose and test a new channel for the transmission of monetary policy. We show that when the Fed funds rate increases, banks widen the interest spreads they charge on deposits, and deposits flow out of the banking system. We present a model in which imperfect competition among banks gives rise to these relationships. An increase in the nominal interest rate increases banks' effective market power, inducing them to increase deposit spreads. Households respond by substituting away from deposits into less liquid but higher-yielding assets. Using branch-level data on all U.S. banks, we show that following an increase in the Fed funds rate, deposit spreads increase by more, and deposit supply falls by more, in areas with less deposit competition. We control for changes in banks' lending opportunities by comparing branches of the same bank. We control for changes in macroeconomic conditions by showing that deposit spreads widen immediately after a rate change, even if it is fully expected. Our results imply that monetary policy has a significant impact on how the financial system is funded, on the quantity of safe and liquid assets it produces, and on its lending to the real economy.

Abstract: We analyse the impact of standard and non-standard monetary policy on bank profitability. We use both proprietary and commercial data on individual euro area bank balance-sheets and market prices. Our results show that a monetary policy easing – a decrease in short-term interest rates and/or a flattening of the yield curve – is not associated with lower bank profits once we control for the endogeneity of the policy measures to expected macroeconomic and financial conditions. Accommodative monetary conditions asymmetrically affect the main components of bank profitability, with a positive impact on loan loss provisions and non-interest income offsetting the negative one on net interest income. A protracted period of low monetary rates has a negative effect on profits that, however, only materialises after a long time period and is counterbalanced by improved macroeconomic conditions. Monetary policy easing surprises during the low interest rate period improve bank stock prices and CDS.

Abstract: We examine recent changes in monetary policy due to the financial crisis and ask whether they are likely to be temporary or permanent. We present evidence from two original surveys - one of central bank governors, the other of academic specialists. We find that central banks in crisis countries are more likely to have resorted to new policies, to have had discussions about changing mandates, and to have communicated more extensively. But thinking has changed more broadly. For instance, many central banks in non-crisis countries also report implementing macro-prudential measures. Looking forward, we expect central banks to have broader mandates, use macro-prudential tools more widely, and communicate more actively than before the crisis. While there is no consensus yet about the usefulness of unconventional monetary policies, we expect most of them will remain in central banks' toolkits, as governors who gain experience with a particular tool are more likely to assess that tool positively. Finally, the relationship between central banks and their governments might well have changed, with central banks " crossing the line" into the political realm more often than in the past.

Abstract: To study the presence of a risk-taking channel in the U.S., we build a comprehensive data set from the syndicated corporate loan market and measure monetary policy using different measures, most notably Taylor (1993) and Romer and Romer (2004) residuals. We identify a negative relation between monetary policy rates and bank risk-taking, especially in the run up to the 2007 financial crisis. However, this effect is purely supply-side driven only when using Taylor residuals and an ex ante measure of bank risk-taking. Our results highlight the sensitivity of the potency of the risk-taking channel to the measures of monetary policy innovations.

Abstract: The prospect of central banks issuing digital currency (CBDC) immediately raises the question of how this new form of money should co-exist and interact with existing forms of money. This paper evaluates three different scenarios for the implementation of CBDC in terms of their monetary policy implications. In the ‘money user scenario’ CBDC co-exists with both cash and commercial bank deposits. In the ‘money manager scenario’ cash is abolished and CBDC co-exists only with commercial bank deposits. And in the ‘money maker scenario’ commercial bank deposits are abolished and CBDC co-exist only with cash. The evaluation is based on an adaption of the classical international monetary policy trilemma to a domestic monetary system with multiple forms of money. Our proposition is that a monetary system with two competing money creators, the central bank and the commercial banking sector, can simultaneously only pursue two out of the following three policy objectives: Free convertibility between CBDC and bank money, parity between CBDC and bank money, and central bank monetary sovereignty, which is the use of monetary policy for anything else than support for commercial bank credit creation. This means that the decision on the design of a monetary system with CBDC implies a crucial political decision on the priorities of the central bank.

Abstract: We empirically assess the effect of reserve accumulation as a result of quantitative easing (QE) on bank-level lending and risk taking activity. To overcome the endogeneity of bank-level reserve holdings to banks' other portfolio decisions, we employ instruments made available by a regulatory change that strongly influenced the distribution of reserves in the banking system. Consistent with theories of the portfolio substitution channel in which the transmission of QE depends in part on reserve creation itself, we document that reserves created in two distinct QE programs led to higher total loan growth and an increase in the share of riskier loans, such as commercial real estate, construction, C&I, and consumer loans, within banks' loan portfolios.

Abstract: We study the impact of monetary policy on the supply of bank credit when bank lending is also denominated in foreign currencies. Accessing a comprehensive supervisory dataset from Hungary, we find that the supply of bank credit in a foreign currency is less sensitive to changes in domestic monetary conditions than the equivalent supply in the domestic currency. Changes in foreign monetary conditions similarly affect bank lending more in the foreign than in the domestic currency. Hence when banks lend in multiple currencies the domestic bank lending channel is weakened and international bank lending channels become operational.

Abstract: In the 2014 Meeting of CEMLA’s Research Network, was decided that starting in 2015 would be conducted a joint research on international spillovers of monetary policy. The Associate Directorate General International Affairs of Banco de Espana, with technical assistance from CEMLA, coordinated this joint research. Researchers from the Central Banks of Brazil, Chile, Colombia, Costa Rica, Dominican Republic, England, Europe (European Central Bank), Guatemala, Jamaica, Mexico, Peru, Spain and Uruguay participated in the activities of this joint research. The documents that integrate this book represent a memoir of the work done by this group of researchers and it gives a comprehensive analysis of the spillover effects of us monetary policy in Latin America and the Caribbean. This book, in line with CEMLA’s objectives, promotes a better understanding of monetary and banking matters in Latin America and the Caribbean.

Abstract: During the last two centuries there have been four main approaches to analysing the determination of the money supply, to wit: (1) Deposits cause Loans, (2) The Monetary Base Multiplier, (3) The Credit Counterparts Approach and (4) Loans cause Deposits. All four approaches are criticized, especially (2) which used to be the standard academic model, and (4) which is now taking over as the consensus approach. Instead, I argue that banking is a service industry, which sets the terms and conditions whereby the private sector can create additional money for itself. The problem is that such money creation tends to be highly procyclical, so the question then becomes finding the best trade-off between official control of that process and allowing sufficient flexibility for the private sector. I conclude by reviewing how Lord King's reform proposals, in his book on The End of Alchemy, might fit into this broader analysis.

Abstract: Introduction This paper analyzes the concept of electronic money in the context of the evolutionary theory of the origin of money and put forward the hypothesis that the emergence of cryptocurrency was the next step in the evolution of money, which resulted due to the presence of objective disadvantages of unsecured paper money. Literature review The concept of electronic money is rather ambiguous. Under the electronic money, people often understand the accounting system of rights to public and private currency. Currently, these systems use electronic storage media. However it is useful to note, that such systems, as well as non-cash payments, were around thousands of years ago (Rupeika-Apoga and Nedovis, 2015; Thalassinos, 2008; Thalassinos and Kiriazidis, 2003). Thus, the modern electronic system is only an advanced version of the thousand-year-old technology. While investigating electronic money from such perspective it can be said that the modern means of bank account access: bank payment cards and internet banking are not electronic money, as these systems simply allow operations with real money held in bank accounts. In other words, these products only provide means of access to real money (Huerta de Soto, J. 2008; Allegret et al., 2016; Boldeanu and Tache, 2016; Fetai, 2015; Glavina, 2015). The problem is somewhat complicated by the fact that all modern banking system uses the principle of fractional reserve funds that were deposited (demand deposits and current accounts), that, in fact, is a fraud (Arslan-Ayaydin et al., 2014; Grima et al., 2016; Suryanto, 2016; Thalassinos et al., 2013; Thalassinos et al., 2015). The use of this principle leads to the fact that the banking system as a whole assumes obviously impracticable obligations, leading to the fact that the volume of bank liabilities (non-cash) far exceeds not only the quantity of cash available in the banking system, but the entire amount of real money in the monetary base of the economy (Rothbard, 2003; Hamid and Won Kie, 2016; Tcvetkov et al., 2015). On the other hand, the emergence and development of means of Internet payments (Webmoney, Yandex, through QIWI, etc.) led to the fact that there were types of payment instruments which, although not related to the procedures of opening a bank account, were based on P2P lending of real money and recognition of the rights to these funds through the ledgers. Thus, the essence of this phenomenon is similar to the "non-cash money". However the problem of fractional reserve is still present here. It is obvious that the number of phenomena that have grown in recent years and are interpreted in the literature as "electronic money" have nothing different from other money substituents which are backed by real monetary units such as: rubles, dollars, gold, etc. For example, in order to obtain electronic money (title characters) WMR, issued by the Webmoney, it is necessary to transfer the corresponding amount in rubles to Issuer's account. Of course, you can get these title characters from another user in the system, but the original source of all the characters is the issuer, that is committed to exchange titular characters for real currencies. The same applies to other similar payment systems: >, >. As a result, "electronic money" is created on the basis of the existing monetary units, simply replacing them in certain sectors of the economy. Of course, the issuer is able to release a larger amount of "electronic money" as opposed to real money, i.e., to act on the principle of fractional reserve. However, it does not mean that "electronic money" is essentially the new kind of money, because this feature can be inherent to any cash substitutes. We can say that the modern "electronic money" is a natural stage in the evolution of means of payment. However, the novelty of "electronic money" is only a technical aspect. …

Abstract: This paper examines the bank lending channel of monetary policy transmission and the effect of banking sector and capital market development on the lending channel using the bank-level panel data of 89 commercial banks in five ASEAN countries (Thailand, Malaysia, the Philippines, Singapore and Indonesia) over the period 1999–2011. The results show that monetary policy has a significant effect via the bank lending channel. The higher the capitalization and liquidity of banks, the weaker the effect of monetary policy via the bank lending channel; however, the greater the size of banks, the stronger the bank lending channel. Banking sector development in terms of banking activities and capital market development leads to a weaker effect of monetary policy through the lending channel, while the development of banks in terms of size strengthens the bank lending channel.

Abstract: This paper analyzes the money demand function for Malawi during the period of 1985-2010 using monthly data. During the sample period, several structural changes occurred in the economy. Most of these changes were ignited by the structural adjustment programs that started in the late 1980s, then came the move to plural politics in the early 1990s. This was followed by structural reforms in the financial sector. In the very recent past, there has been an increase in real economic activity as measured by strong growth in real GDP in the years after 2002 and the financial innovations within the banking system after the year 2000. These factors do not seem to have affected the stability of the demand for money and hence increasing the probability of success for the conduct of monetary policy. Cointegration test results indicate a long-run relationship amongst real money balances, prices, income, exchange rate, Treasury bill rate and financial innovation. While all variables significantly influence money demand in the long-run, short-run policy must be directed at increasing financial innovation, open market activities and improving the productivity of the economy to provide higher return on alternative investments.

Abstract: The paper analyses the impact of Japanese monetary policy crisis management on the Japanese banking sector since the 1998 Japanese financial crisis It shows how low-cost liquidity provision as a means to stabilize banks has created a growing gap between deposits above lending and has compressed interest margins as the traditional source of bank’s income Efficiency scores are compiled to estimate the impact of monetary policy crisis management on the efficiency of banks The estimation results provide evidence that the Japanese monetary policy crisis management has contributed to declining efficiency in the banking sector despite or because of growing concentration

Abstract: Monetary delegation to independent central banks is the institutional standard for responsible monetary policy making. Governments overcome their own high inflation biases by delegating policy-making discretion to conservative central bankers with political independence and long terms of appointment. With a formal model of central bank appointments and monetary policy making, I provide results suggesting this canonical result hinges on widespread, empirically false assumptions about the nature of central bank preferences and the economic environment in which monetary policy making occurs. During periods of heightened monetary uncertainty, delegation to an independent central bank is a less effective institutional solution to achieving inflation goals than extant theory suggests. Under realistic economic conditions, monetary delegation can result in economic outcomes even worse than those we would expect if the government had maintained discretion. I test several predictions from the model drawing appointm...

Abstract: This paper examines the effects of monetary policy on the equity values of European banks. We identify monetary policy shocks by looking at changes in the EONIA one month and two year swap contracts yield during narrow windows around the press statements and press conferences announcing monetary policy actions taken by the Eurosystem’s Governing Council. We find that an unexpected decrease of 100 basis points on the short-term policy rate increases banks’ stock prices by 3.9% on average. These effects vary substantially over time; in particular, they were stronger during the crisis period and reversed during the recent period with low and even negative interest rates. That is, with rates close to or below zero, further interest rate cuts became detrimental for banks’ equity values. The composition of banks’ balance sheets is important in order to understand these effects. In particular, the change in sensitivity to interest rate surprises as rates drop to low and negative levels is much more pronounced for banks with a high reliance on deposit funding, compared to other banks. We argue that this pattern can be explained by a reluctance of banks to pay negative interest rates on retail deposits.

Abstract: The euro area economy is emerging from a very pronounced crisis which has added complexity to achieving the price stability objective. The ECB has implemented an array of monetary policy instruments which are working their way through the economy and are proving to be very effective in supporting the recovery. By acting as it has, the ECB has continued to show that it will always respond to its communicated reaction function and thereby, reassure the public of its commitment to its fulfilling its mandate.

Abstract: This paper examines the real and financial effects of reserves in a Dynamic Stochastic General Equilibrium (DSGE) model with monopoly banking and credit market imperfections. The framework explicitly accounts for the fact that commercial banks hold excess reserves and they incur costs in holding these assets. The model also accounts for imperfect substitutability between bank funding sources and it shows that this feature is an important channel through which reserve requirement shocks can affect real variables. Numerical experiments show that an increase in reserve requirements creates a countercyclical effect for real economic activity. The results also indicate that the combination of an augmented Taylor rule which responds to excess reserves and a countercyclical reserve requirement rule is optimal to mitigate macroeconomic and financial volatility associated with liquidity shocks.

Abstract: This paper examines the implications of financial innovations on Nigeria’s monetary policy, using: trend analysis, error correction mechanism, and a structural model estimated with generalized method of moments. The study found that financial innovation improves the interest rate channel of monetary policy transmission, and the efficiency of the financial system. However, it increases the output gap and adds an element of uncertainty in the monetary policy environment as it increases the cost of implementing monetary policy and impinges on the potency of the operating target through its impact on the stability of the money multiplier, money velocity, and demand for money.

Abstract: This paper analyzes the basic parameters of monetary policy in 2000-2015 in Russia. We provide the overview of tools and objectives of monetary policy of the Bank of Russia and identify the periods of homogeneity of monetary policy regimes: from money base targeting to exchange rate targeting and finally, to interest rates policy. On the basis of this research we develop the recommendations for further quantitative research aimed at estimation of monetary policy effects in Russia.