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DIFFERENTIAL DEPOSIT GUARANTEES AND THE EFFECT OF MONETARY POLICY ON BANK LENDING
Author(s) -
OPIELA TIMOTHY P.
Publication year - 2008
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.2007.00100.x
Subject(s) - monetary policy , loan , monetary economics , economics , differential (mechanical device) , deposit insurance , financial system , credit channel , reserve requirement , business , finance , inflation targeting , central bank , aerospace engineering , engineering
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)