Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/267228 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 9995
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
How much deposits and equity a bank has influences how a banks' lending responds to monetary policy. While the responsiveness for the bank lending channel has been well established, this is not the case for the risk-taking channel (RTC). We show in a value-at-risk RTC model that the lending for banks with relatively more equity and non-interest-bearing deposits should respond less to monetary policy tightening. This suggests that non-interest-bearing deposits act as "pseudo capital". In a panel of US banks, we find strong evidence in support of our model for various risk measures.
Subjects: 
bank lending
deposits
value-at-risk
pseudo capital
JEL: 
E43
E52
G21
Document Type: 
Working Paper
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