Bank Lending and Interest on Excess Reserves

Simple item page
dc.contributor.authorHogan, Thomas L.
dc.contributor.orgJames A. Baker III Institute for Public Policy
dc.date.accessioned2018-03-16T17:35:53Z
dc.date.available2018-03-16T17:35:53Z
dc.description.abstractThis paper analyzes the relationship between bank lending and the Federal Reserve's policy of paying interest on excess reserves (IOER). We argue that the Fed's IOER policy deviates from the standard interest-rate floor framework in ways that influence banks' incentives to hold loans and reserves. Using quarterly data from the start of 2000 through the third quarter of 2017, we find that banks' holdings of loans and reserves are related to GDP growth and employment but are not related to measures of loan demand or economic uncertainty. Accounting for these factors, banks' loan holdings are inversely related to both the rate of IOER and to its premium above short-term market interest rates. We estimate that the Fed's IOER policy accounts for more than half of the post-crisis decline in bank loan allocations.
dc.identifier.citationHogan, Thomas L.. "Bank Lending and Interest on Excess Reserves." (2018) James A. Baker III Institute for Public Policy: <a href="https://www.bakerinstitute.org/research/bank-lending-and-interest-excess-reserves/">https://www.bakerinstitute.org/research/bank-lending-and-interest-excess-reserves/</a>.
dc.identifier.digitalworkingpaper-banklending-020718
dc.identifier.urihttps://hdl.handle.net/1911/99712
dc.publisherJames A. Baker III Institute for Public Policy
dc.relation.urihttps://www.bakerinstitute.org/research/bank-lending-and-interest-excess-reserves/
dc.rightsThis material may be quoted or reproduced without prior permission, provided appropriate credit is given to the author and the James A. Baker III Institute for Public Policy.
dc.subjectFederal Reserve
dc.subjectBanks
dc.subjectLending
dc.subjectReserves
dc.subjectIOER
dc.subjectMonetary policy
dc.titleBank Lending and Interest on Excess Reserves
dc.typeWorking paper
Files
Original bundle
Now showing 1 - 1 of 1
Thumbnail Image
Name:
workingpaper-banklending-020718.pdf
Size:
720.59 KB
Format:
Adobe Portable Document Format
Download
Collections
Baker Institute Publications