DIFFERENTIAL DEPOSIT GUARANTEES AND THE EFFECT OF MONETARY POLICY ON BANK LENDING

This paper utilizes differences in de jure deposit insurance coverage across banks and changes in coverage over time to identify a bank‐lending channel in Poland. Banks with partial guarantees have a stronger loan response to monetary policy than banks with full guarantees. Furthermore, the weak res...

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Bibliographic Details
Published in:Economic inquiry 2008-10, Vol.46 (4), p.610-623
Main Author: OPIELA, TIMOTHY P.
Format: Article
Language:English
Subjects:
Balance sheets
Bank holding companies
Bank loans
Bank reserves
Banking industry
Banks
Credit market
Deposit insurance
Funding
Guarantees
Impact analysis
Influence
Insurance coverage
Loans
Monetary economics
Monetary policy
Reserve requirements
Services
Studies
Systems development
Transmission mechanism
Uninsured people
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Summary:This paper utilizes differences in de jure deposit insurance coverage across banks and changes in coverage over time to identify a bank‐lending channel in Poland. Banks with partial guarantees have a stronger loan response to monetary policy than banks with full guarantees. Furthermore, the weak response of the fully guaranteed banks is attributed to their ability to raise low‐reserve, uninsured time deposits relative to the partially covered banks. When differential coverage is eliminated, there is no disparity in the loan response between the two groups. This lending channel has implications for credit control and financial system development in emerging markets. (JEL E52, G21, G28)
ISSN:0095-2583
1465-7295
DOI:10.1111/j.1465-7295.2007.00100.x