Monetary Policy plays a crucial role in modern economies by supporting price, financial and economic stability. Its efficacy, however, exhibits variation both over time and across space leading to partially unpredictable and inconsistent outcomes. This thesis shows that the variation in the efficacy of monetary policy crucially relates to the micro-heterogeneity and market structure of the financial intermediaries sector. The first essay presented in this thesis documents that the responses of loan interest rates and economic activity to changes in the monetary policy rate depend on the cross-sectional skewness of loan interest rates across lenders prior to the policy rate change. A model of lenders' imperfect competition with borrowers' search and switching frictions can account for this empirical finding. The second essay presented in this thesis focuses instead on the variation in the efficacy of monetary policy between states in which interest rates are positive and states in which they are nearly zero or negative. It establishes strong empirical evidence that the strength of monetary policy efficacy does not change across the two states. However, the initial distribution of deposit rates offered by depository institutions is an essential driver of efficacy when policy rates are set to negative levels.

Creator

• Puglisi, Federico

DOI

• https://doi.org/10.21985/n2-d2r8-pq93

Subject

• Economics
• Finance
• Banking

Language

• en

Alternate Identifier

• etdadmin_upload_986697
• http://dissertations.umi.com/northwestern:16603

Keyword

• Market Structure
• State-Dependent Effects
• Loan and Deposit Interest Rates
• Monetary Policy
• Financial Intermediaries
• Heterogeneity

Date created

• 2023-01-01

Resource type

• Dissertation

Rights statement

• In Copyright