What is the effect of unconventional monetary policy on bank performance? |
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| Institution: | 1. School of Business, Management and Economics, University of Sussex, Jubilee Building, Brighton, BN1 9SL, United Kingdom;2. Nottingham Business School, Nottingham Trent University, Newton Building, Nottingham, NG1 4BU, United Kingdom;1. Faculty of Political Science, University of Teramo, Via R. Balzarini, 1, 64100 Teramo, Italy;2. Department of Economics and Business, LUISS Guido Carli, Viale Romania, 32, 00197 Rome, Italy;1. Bank for International Settlements, BIS Centralbahnplatz, 2 CH-4002 Basel, Switzerland;2. Bank for International Settlements and CEPR, BIS Centralbahnplatz, 2 CH-4002 Basel, Switzerland;1. CREST-Ensai ULCO, France;2. Univ Lyon, Université Lumière Lyon 2, GATE L-SE UMR 5824, F-69130 Ecully, France, and Institut Universitaire de France;3. Université d’Evry, France |
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| Abstract: | This paper examines the relationship between unconventional monetary policy and the US banking performance. Unconventional monetary policy is captured through the central bank's assets and excess reserves. Results show that unconventional monetary policy has a negative relationship with bank performance. Further analysis shows that the negative association between unconventional monetary policy and performance is mitigated for banks with a high level of asset diversification and low deposit funding. We also find that the negative relationship between unconventional monetary policy and performance subdues for deposit insured financial institutions. Finally, we use dynamic panel threshold analysis which reveals that the negative association between unconventional monetary policy and bank performance is particularly pronounced above the reported threshold value. |
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