Monetary Policy Transmission Through Online Banks / Isil Erel, Jack Liebersohn, Constantine Yannelis, Samuel Earnest.

Format:

Book

Author/Creator:

Erel, Isil.

Contributor:

National Bureau of Economic Research.

Liebersohn, Jack.

Yannelis, Constantine.

Earnest, Samuel.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31380.

NBER working paper series no. w31380

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

Financial technology has reshaped commercial banking. It has the potential to radically alter the transmission of monetary policy by lowering search costs and expanding bank markets. This paper studies the reaction of online banks to changes in federal fund rates. We find that these banks increase rates that they offer on deposits significantly more than traditional banks do. A 100 basis points increase in the federal fund rate leads to a 30 basis points larger increase in rates of online banks. Consistent with the rate movements, online bank deposits experience inflows, while traditional banks experience outflows during monetary tightening in 2022. The findings are consistent across banking markets of different competitiveness and demographics. Our findings shed new light on the role of online banks in interest rate pass-through and deposit channel of monetary policy.

Notes:

Print version record

June 2023.