An Adverse Selection Model of Bank Asset and Liability Management with Implications for the Transmission of Monetary Policy / Jeremy C. Stein.

Format:

Book

Author/Creator:

Stein, Jeremy C.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w5217.

NBER working paper series no. w5217

Language:

English

Subjects (All):

Asset-liability management.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1995.

Cambridge, Mass : National Bureau of Economic Research, 1995.

Summary:

This paper develops a model of bank asset and liability management, based on the idea that information problems make it difficult for banks to raise funds with instruments other than insured deposits. The model can be used to address the question of how monetary policy works. One effect it captures is that when the Fed reduces reserves, this tightens banks' financing constraints and thereby leads to a cutback in bank lending -- this is the 'bank lending channel' in action. However, in addition to providing a specific set of microfoundations for the lending channel, the model also yields a novel account of how monetary policy affects bond-market interest rates.

Notes:

Print version record

August 1995.