Alberto Polo
Could the slow response of deposit rates to changes in monetary policy strengthen its impact on the economy? At first look, the answer would probably be 'no'. Imperfect pass-through of policy to deposit rates means that the rates on a portion of assets in the economy respond by less than they could. But what if this meant that the rates on other assets responded by more? In a recent paper, I develop a model that is consistent with a number of features of banks' assets and liabilities and find that monetary policy has a larger effect on economic activity and inflation if the pass-through of policy to deposit rates is partial.
| Comment | See all comments |
