Monetary policy effects on assets of commercial banks in the United States
My dissertation offers another look at the credit channel of monetary transmission in the United States. I demonstrate empirical evidence that innovations in monetary policy (a surprise monetary expansion) lead to an increase in the share of risky assets on the balance sheet of the aggregate commercial bank sector in the United States. Impulse response functions from a structural vector autoregression model with restrictions in the long-run effect of monetary policy along the lines of Blanchard and Quah (1989) demonstrate that risky asset shares respond positively to negative innovations in the federal funds rate. A version of the consumption-based capital asset pricing model that treats banks as an optimal portfolio of risky and risk-free assets managed by a banker in exchange for extracting compensation out of the income generated by the bank explains the rise in the risky asset share after monetary expansion. The risky asset share of total bank assets (or shares of different risky assets separately) can be considered when monitoring the credit channel of monetary transmission.
Nikolov, Plamen, "Monetary policy effects on assets of commercial banks in the United States" (2012). ETD Collection for Fordham University. AAI3563408.