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Steven W. Sumner and Guy Yamashiro
''Bank liabilities and the monetary transmission mechanism''
( 2011, Vol. 31 No.2 )
Using two sources of data on commercial bank liabilities we examine the behavior of various components of deposits following a monetary tightening (downturn) as well as a nonmonetary downturn equal in magnitude to the monetary downturn in order to better understand the portfolio behavior of commercial banks. We find that the increase in total deposits during a monetary tightening (when output is low and interest rates are high) is attributable to an increase in small time deposits and that large time deposits and demand deposits exhibit a decrease. This suggests that banks are able to, at least partially, offset the potentially adverse effects of a monetary tightening on their balance sheet by borrowing and raising additional small time deposits. Further, non-monetary downturns, when both interest rates and output are low, seem to have little effect on the liability position of banks.
JEL: E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General
Manuscript Received : Jan 13 2011 Manuscript Accepted : May 12 2011

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