Working Paper

Banks’ Regulatory Buffers, Liquidity Networks and Monetary Policy Transmission

Authors

  • Christian Merkl
  • Stéphanie Stolz
Publication Date

Based on a quarterly regulatory dataset for German banks from 1999 to 2004, this paper analyzes the effects of banks’ regulatory capital on the transmission of monetary policy in a system of liquidity networks. The dynamic panel regression results provide evidence in favor of the bank capital channel theory. Banks holding less regulatory capital and less interbank liquidity react more restrictively to a monetary tightening than their peers.

Info

JEL Classification
E52, G21, G28, C23

Key Words

  • bank capital channel
  • bank lending channel
  • liquidity networks
  • monetary policy transmission