nep-ban New Economics Papers
on Banking
Issue of 2019‒10‒21
twenty-one papers chosen by
Christian Calmès, Université du Québec en Outaouais

  1. Bank Market Power and Firm Finance: Evidence from Bank and Loan Level Data By Tamayo, Cesar E.; Gomez, Jose E.; Valencia, Oscar
  2. The real effects of bank distress: Evidence from bank bailouts in Germany By Bersch, Johannes; Degryse, Hans; Kick, Thomas; Stein, Ingrid
  3. Beyond the zero lower bound: negative policy rates and bank lending By Garyn Tan
  4. The countercyclical capital buffer and the composition of bank lending By Auer, Raphael; Ongena, Steven
  5. Predicting Consumer Default: A Deep Learning Approach By Stefania Albanesi; Domonkos F. Vamossy
  6. Insolvency-Illiquidity, Macro Externalities and Regulation By Faia, Ester
  7. The Business Model of Social Banks By Simon Cornée; Panu Kalmi; Ariane Szafarz
  8. Small firms and domestic bank dependence in Europe’s great recession By Mathias Hoffmann; Egor Maslov; Bent E. Sørensen
  9. Macroprudential Policy with Leakages By Bengui, Julien; Bianchi, Javier
  10. The Banking View of Bond Risk Premia By Valentin Haddad; David A. Sraer
  11. Mission Drift in Microcredit: A Contract Theory Approach By Sara Biancini; David Ettinger; Baptiste Venet
  12. Is Basel III counter-cyclical: The case of South Africa? By Guangling Liu; Thabang Molise
  13. Rules versus Discretion in Bank Resolution By Walther, Ansgar; White, Lucy
  14. It's the tail-risk, stupid! Precluding regulatory arbitrage in shadow banking with a normatively charged approach to supervision capitalizing on multipolar regulatory dialogues By Thiemann, Matthias; Tröger, Tobias
  15. Splitting credit risk into systemic, sectorial and idiosyncratic components By Álvaro Chamizo; Alfonso Novales
  16. Money Runs By Donaldson, Jason Roderick; Piacentino, Giorgia
  17. The Short Rate Disconnect in a Monetary Economy By Lenel, Moritz; Piazzesi, Monika; Schneider, Martin
  18. Markovian model for granting credit in microfinance By Philibert Andriamanantena; Issouf Abdou; Mamy Raoul Ravelomanana; Rivo Rakotozafy
  19. Bank financing to SMEs in the Republic of North Macedonia: Evidence from Survey Data By Tanja Jakimova; Neda Popovska Kamnar
  20. Is There a Zero Lower Bound? The Effects of Negative Policy Rates on Banks and Firms By Altavilla, Carlo; Burlon, Lorenzo; Giannetti, Mariassunta; Holton, Sarah
  21. On Money As a Latent Medium of Exchange By Lagos, Ricardo; Zhang, Shengxing

  1. By: Tamayo, Cesar E.; Gomez, Jose E.; Valencia, Oscar
    Abstract: We present new measures of market power for the banking industry in Colombia and estimate their effect on the cost of credit for non-financial firms. Our results suggest that bank competition increased during the 2006-2008 period –even as concentration increased– but decreased thereafter. Using a unique combination of loan, firm and bank-level datasets we are also able to show that banks loosing overall market power –measured by the average price-cost margin– decrease interest rates to small firms, but increase rates to firms with which they have the oldest credit relationships. This suggests (i) the existence of market power that is specific to the bank-firm relationship (i.e., informational lock-in and hold-up problems due to switching costs), and (ii) that size may be capturing other firm attributes such as observable risk, scale effects or implicit collateral.
    Keywords: Bank competition; Market power; Boone; Lerner; Colombia; Cost of firm finance; Loan-level data
    JEL: G21 D22 O16
    Date: 2019–10
  2. By: Bersch, Johannes; Degryse, Hans; Kick, Thomas; Stein, Ingrid
    Abstract: How does bank distress impact their customers' probability of default and trade credit availability? We address this question by looking at a unique sample of German firms from 2000 to 2011. We follow their firm-bank relationships through times of distress and crisis, featuring the different transmission of bank distress shocks into already weakened firm balance sheets. We find that a distressed bank bailout, which is subject to restructuring and deleveraging conditions, leads to a bank-induced increase of firms' probabilities of default. Moreover, bailouts tend to reduce trade credit availability and ultimately firms' sales. We further find that the direction and magnitude of the effects depends on firm quality and the relationship orientation of banks.
    Keywords: bank distress,bank risk channel,firm risk channel,relationship banking,firm defaults,financial crisis
    JEL: G01 G21 G24 G33
    Date: 2019
  3. By: Garyn Tan
    Abstract: How do banks operate in a negative policy rate environment? Bank profitability is threatened by policy rate cuts in negative territory because the zero lower bound on retail deposit rates prevents banks from benefiting from cheaper deposit funding costs. Contrary to some earlier research, this paper finds that banks most affected by negative rates through this retail deposits channel increase their lending relative to less affected banks. The response is limited to mortgage lending, and is driven by banks with high household deposit ratios and banks with high overnight deposit ratios. Overall, net interest margins are unaffected, which implies that the volume effect is large enough to offset the adverse impact on bank profitability. However, the positive effect on lending dissipates as negative rates persist. This suggests that although the "reversal rate" has not been breached, it may creep up over time as banks become more limited in their options to maintain profit margins. The results also point to an important role for bank capitalisation - net interest margins of relatively highly capitalised banks are squeezed, whereas the net interest margins of less capitalised banks are unaffected. This can be explained by differences in capacity for shock absorbency.
    Keywords: negative rates; zero lower bound; bank lending channel; monetary policy Transmission
    JEL: E43 E52 E58 G20 G21
    Date: 2019–09
  4. By: Auer, Raphael; Ongena, Steven
    Abstract: Do macroprudential regulations on residential lending influence commercial lending behavior too? To answer this question, we identify the compositional changes in banks' supply of credit using the variation in their holdings of residential mortgages on which extra capital requirements were uniformly imposed by the countercyclical capital buffer (CCyB) introduced in Switzerland in 2012. We find that the CCyB's introduction led to higher growth in commercial lending although this was unrelated to conditions in regional housing markets. Interest rates and fees charged to the firms concurrently increased. We rationalize these findings in a model featuring both private and firm-specific collateral.
    Keywords: bank capital; credit; macroprudential policy; Spillovers; systemic risk
    JEL: E51 E58 E60 G01 G21 G28
    Date: 2019–08
  5. By: Stefania Albanesi; Domonkos F. Vamossy
    Abstract: We develop a model to predict consumer default based on deep learning. We show that the model consistently outperforms standard credit scoring models, even though it uses the same data. Our model is interpretable and is able to provide a score to a larger class of borrowers relative to standard credit scoring models while accurately tracking variations in systemic risk. We argue that these properties can provide valuable insights for the design of policies targeted at reducing consumer default and alleviating its burden on borrowers and lenders, as well as macroprudential regulation.
    Keywords: consumer default, credit scores, deep learning, macroprudential policy
    JEL: D14 E44 G21
    Date: 2019–09
  6. By: Faia, Ester
    Abstract: This paper studies the optimal design of equity and liquidity regulations in a dynamic macro model with information-based bank runs. Although the latter are privately efficient, since they discipline bank managers efforts into the projects' re-deploying activity, they induce aggregate externalities. Technological inefficiencies arise if bank managers extract rents which are higher than the technological costs of re-deploying projects. Pecuniary externalities arise since, when choosing leverage, bank managers do not internalize the fall in asset price ensuing from the aggregate costs of projects' liquidation in a run event. This creates scope for regulation. Equity and liquidity requirements are complementary, as the first tackles the solvency region, while the second the illiquid-solvent one. Finally, in presence of anticipatory effects prudential policies may have unintended consequences as banks adjust their behaviour when a shift in prudential regime is announced. The more so the higher the credibility of the announcement.
    Keywords: Basel regimes; equity requirements; information-based bank runs; liquidity requirements; Pecuniary externalities; Ramsey plan
    JEL: E0 E5 G01
    Date: 2019–10
  7. By: Simon Cornée (Univ Rennes, CNRS, CREM - UMR 6211, F-35000 Rennes, France); Panu Kalmi (University of Vaasa, Faculty of Business Studies, Finland); Ariane Szafarz (Université Libre de Bruxelles (ULB), SBS-EM, CEB, and CERMi, Belgium)
    Abstract: Based on an extensive literature review, this paper proposes to define social banks (SBs) as social enterprises that run banking activities with the social mission of supplying credit to other social enterprises, which are typically less profitable than for-profit businesses. This definition marks our starting point for developing a theoretical framework to explain how SBs survive without subsidies in the banking market. We build on a two-pillar business model of value-based financial intermediation, which comprises an ownership structure that limits residual ownership claims and preferential credit conditions associated with financial sacrifices from motivated depositors. We also clarify the link between SBs and stakeholder banks and weigh up the importance of market interest rates for facilitating the business of SBs. An empirical analysis based on panel regressions on 5,400 European banks over the 1998-2013 period attests to the relevance of our theoretical framework. It also confirms that a low interest rate environment raises concerns about the sustainability of the SB business model.
    Keywords: Social banks; European banks; Business Model; Financial Intermediation; Social Enterprises
    JEL: G20 L33 M14 L31 P13
    Date: 2019–10
  8. By: Mathias Hoffmann; Egor Maslov; Bent E. Sørensen
    Abstract: Small businesses (SMEs) depend on banks for credit. We show that the severity of the Eurozone crisis was worse in countries where firms borrowed more from domestic banks (“domestic bank dependence”) than in countries where firms borrowed more from international banks. Eurozone banking integration in the years 2000–2008 mainly involved cross-border lending between banks while foreign banks’ lending to the real sector stayed flat. Hence, SMEs remained dependent on domestic banks and were vulnerable to global banking shocks. We confirm, using a calibrated quantitative model, that domestic bank dependence makes sectors and countries with many SMEs vulnerable to global banking shocks.
    Keywords: Small and medium enterprises, SME access to finance, Banking integration, Domestic bank dependence, International transmission, Eurozone crisis
    JEL: F30 F36 F40
    Date: 2019–10
  9. By: Bengui, Julien; Bianchi, Javier
    Abstract: The outreach of macroprudential policies is likely limited in practice by imperfect regulation enforcement, whether due to shadow banking, regulatory arbitrage, or other regulation circumvention schemes. We study how such concerns affect the design of optimal regulatory policy in a workhorse model in which pecuniary externalities call for macroprudential taxes on debt, but with the addition of a novel constraint that financial regulators lack the ability to enforce taxes on a subset of agents. While regulated agents reduce risk taking in response to debt taxes, unregulated agents react to the safer environment by taking on more risk. These leakages do undermine the effectiveness of macruprudential taxes, yet they do not necessarily call for weaker interventions. Quantitatively, we find that a well-designed macroprudential policy that accounts for leakages remains successful at mitigating the vulnerability to financial crises.
    Keywords: capital flow management; financial crises; limited regulation enforcement; macroprudential policy; regulatory arbitrage
    JEL: E58 F32 G28
    Date: 2019–08
  10. By: Valentin Haddad; David A. Sraer
    Abstract: Banks' balance-sheet exposure to fluctuations in interest rates strongly forecasts excess Treasury bond returns. This result is consistent with optimal risk management, a banking counterpart to the household Euler equation. In equilibrium, the bond risk premium compensates banks for bearing fluctuations in interest rates. When banks' exposure to interest rate risk increases, the price of this risk simultaneously rises. We present a collection of empirical observations supporting this view, but also discuss several challenges to this interpretation.
    JEL: G0 G12 G21
    Date: 2019–10
  11. By: Sara Biancini (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique, THEMA - Théorie économique, modélisation et applications - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique); David Ettinger (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique, LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine); Baptiste Venet (LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine, DIAL - Développement, institutions et analyses de long terme, Institut de Recherche pour le Développement (IRD))
    Abstract: We analyze the relationship between Microfinance Institutions (MFIs) and external funding institutions, with the aim of contributing to the debate on "mission drift" (the tendencyfor MFIs to lend money to wealthier borrower rather than to the very poor). We suggestthat funding institutions build incentives for MFIs to choose the adequate share of poorerborrowers and to exert effort to increase the quality of the funded projects. We show thatasymmetric information on both the effort level and its cost may increase the share of richerborrowers. However the unobservability of the cost of effort has an ambiguous effect. Itpushes efficient MFIs to serve a higher share of poorer borrowers, while less efficient onesdecrease their poor outreach.
    Keywords: Microfinance,Funding Institutions,Mission Drift,Contract Theory
    Date: 2019–10–03
  12. By: Guangling Liu; Thabang Molise
    Abstract: This paper develops a dynamic general equilibrium model with banking and a macro-prudential authority, and studies the extent to which the Basel III bank capital regulation promotes financial and macroeconomic stability in the context of South African economy. The decomposition analysis of the transition from Basel II to Basel III suggests that it is the counter-cyclical capital buffer that effectively mitigates the pro-cyclicality of its predecessor, while the impact of the conservative buffer is marginal. Basel III has a pronounced impact on the financial sector compared to the real sector and is more effective in mitigating fluctuations in financial and business cycles when the economy is hit by financial shocks. In contrast to the credit-to-GDP ratio, the optimal policy analysis suggests that the regulatory authority should adjust capital requirement to changes in credit and output when implementing the counter-cyclical buffer.
    Keywords: Bank capital regulations, Financial Stability, counter-cyclical capital buffer, DSGE
    JEL: E44 E47 E58 G28
    Date: 2018–08
  13. By: Walther, Ansgar; White, Lucy
    Abstract: Recent reforms give regulators broad powers to "bail-in" bank creditors during financial crises. We analyze efficient bail-ins and their implementation. To preserve liquidity, regulators must avoid signalling negative private information to creditors. Therefore, optimal bail-ins in bad times depend only on public information. As a result, the optimal policy cannot be implemented if regulators have wide discretion, due to an informational time-inconsistency problem. Rules mandating tough bail-ins after bad public signals, or contingent convertible (co-co) bonds, improve welfare. We further show that bail-in and bailout policies are complementary: if bailouts are possible, then discretionary bail-ins are more effective.
    Keywords: bail-in; bail-out; bank resolution; bank runs; financial crises
    JEL: G01 G18 G21
    Date: 2019–10
  14. By: Thiemann, Matthias; Tröger, Tobias
    Abstract: The use of contractual engineering to create channels of credit intermediation outside of the realm of banking regulation has been a recurring activity in Western financial systems over the last 50 years. After the financial crisis of 2007 and 2008, this phenomenon, at that time commonly referred to as 'shadow banking', evoked a large-scale regulatory backlash, including several specific regulatory constraints being placed on non-bank financial institutions (NBFI). This paper proposes a different avenue for regulators to keep regulatory arbitrage under control and preserve sufficient space for efficient financial innovation. Rather than engaging in the proverbial race between hare and hedgehog that is emerging with increasingly specific regulation of particular contractual arrangements, this paper argues for a normative approach to supervision. We outline this approach in detail by showing that regulators should primarily analyse the allocation of tail risk inherent in the respective contractual arrangements. Our paper proposes to assign regulatory burdens equivalent to prudential banking regulation, in case these arrangements become only viable through indirect or direct access to an (ad hoc) public backstop. In order to make the pivotal assessment, regulators will need information about recent contractual innovations and their risk-allocating characteristics. According to the scholarship on regulatory networks serving as communities of interpretation, we suggest in particular how regulators should structure their relationships with semi-public gatekeepers such as lawyers, auditors and consultants to keep abreast of the real-world implications of evolving transactional structures. This paper then uses the rise of credit funds as a non-bank entities economically engaged in credit intermediation to apply this normative framework, pointing to recent contractual innovations that call for more regulatory scrutiny in a multipolar regulatory dialogue.
    Keywords: shadow banking,regulatory arbitrage,principles-based regulation,credit funds,prudential supervision,non-bank financial intermediation
    JEL: G21 G28 H77 K22 K23 L22
    Date: 2019
  15. By: Álvaro Chamizo (BBVA.); Alfonso Novales (Instituto Complutense de Análisis Económico (ICAE), and Department of Economic Analysis, Facultad de Ciencias Económicas y Empresariales, Universidad Complutense, 28223 Madrid, Spain.)
    Abstract: We provide a methodology to estimate a global credit risk factor from CDS spreads that can be very useful for risk management. The global risk factor (GRF) reproduces quite well the different epis- odes that have affected the credit market over the sample period. It is highly correlated with standard credit indices, but it contains much higher explanatory power for fluctuations in CDS spreads across sectors than the credit indices themselves. The additional information content over iTraxx seems to be related to some financial interest r ates. We first use the estimated GRF to analyze the extent to which the eleven sectors we consider are systemic. After that, we use it to split the credit risk of indi- vidual issuers into systemic, sectorial, and idiosyncratic components, and we perform some analyses to test that the estimated idiosyncratic components are actually firm-specific. The systemic and sec- torial components explain around 65% of credit risk in the European industrial and financial firms and 50% in the North American firms in those sectors, while 35% and 50% of risk, respectively, has an idiosyncratic nature. Thus, there is a significant margin for portfolio diversification. We also show that our decomposition allows us to identify those firms whose credit would be harder to hedge. We end up analyzing the relationship between the estimated components of risk and some synthetic risk factors, in order to learn about the different nature of the credit risk components.
    Keywords: Credit Risk; Systemic Risk; Sectorial Risk; Idiosyncratic Risk; Asset Allocation.
    JEL: C58 F34 G01 G32
    Date: 2019–09
  16. By: Donaldson, Jason Roderick; Piacentino, Giorgia
    Abstract: We develop a model in which, as in practice, bank debt is both a financial security used to raise funds and a kind of money used to facilitate trade. This dual role of bank debt provides a new rationale for why banks do what they do. In the model, banks endogenously perform the essential functions of real-world banks: they transform liquidity, transform maturity, pool assets, and have dispersed depositors. Moreover, they make their debt redeemable on demand. Thus, they are endogenously fragile. We show novel effects of narrow banking, suspension of convertibility, and some other policies.
    Keywords: Banking; demandable debt; financial fragility; Private money
    JEL: E40 G21 G32
    Date: 2019–08
  17. By: Lenel, Moritz; Piazzesi, Monika; Schneider, Martin
    Abstract: In modern monetary economies, most payments are made with inside money provided by payment intermediaries. This paper studies interest rate dynamics when payment intermediaries value short bonds as collateral to back inside money. We estimate intermediary Euler equations that relate the short safe rate to other interest rates as well as intermediary leverage and portfolio risk. Towards the end of economic booms, the short rate set by the central bank disconnects from other interest rates: as collateral becomes scarce and spreads widen, payment intermediaries reduce leverage, and increase portfolio risk. We document stable business cycle relationships between spreads, leverage, and the safe portfolio share of payment intermediaries that are consistent with the model. Structural changes, especially in regulation, induce low frequency shifts, such as after the financial crisis.
    Date: 2019–08
  18. By: Philibert Andriamanantena (Université de Fianarantsoa [Fianarantsoa]); Issouf Abdou (Université des Comores); Mamy Raoul Ravelomanana (Faculté des Sciences - Université d'Antananarivo - Université d'Antananarivo); Rivo Rakotozafy (Université de Fianarantsoa [Fianarantsoa])
    Abstract: ABSTRACT. Starting from the generalized model of Osman Khodr and Francine Diener [1], we present a new model that meets the expectations of the microfinance institution (MFI) and that of the borrowers and that incorporates all the characteristics of the poor, namely tolerance in case of partial default and the possibility of having a progressive loan automatically. This model will provide microfinance institutions with a decision support tool that is better adapted to the reality of microfinance. Our Markov chain consists of several statements associated with the economic status of the borrower including three types of recipients B 1 (state of being beneficiary at a time t = 0), B 2 (state to be beneficiary at a time t = 1) and I (state of financial inclusion: permanent beneficiary), an applicant state A 1 and A T −1 ((T − 1) excluded states). We modeled a borrower's behavior by a λ parameter that depends on the borrower's α probability of success. At the initial time, λ = 1+α 1−α , this quantity changes as soon as the borrower moves from one state to another with a probability of success different from α. The agency's decision to grant a credit depends entirely on the λ parameter which is compared to the set subjective threshold-values. The chance γ to have a loan (γ: probability of credit request granted) for a borrower depends on the parameter λ, with γ = 1 − 1 λ. keywords: Microfinance, Credit Grant Decision, Markov Chain, Individual Loan, Dynamic Incentive, Updated Expected Profit
    Abstract: En partant du modèle généralisé de Osman Khodr et Francine Diener [1], nous présentons un nouveau modèle qui répond aux attentes de l'institution de microfinance (IMF) et celle des emprunteurs et qui incorpore toutes les caracté-ristiques des populations pauvres, à savoir la tolérance en cas de défaut partiel et la possibilité d'avoir un prêt progressif de façon automatique. Ce modèle offrira aux institutions de microfinance un outil d'aide à la décision plus adapté à la réalité de la microfinance. Notre chaîne de Markov comprend plusieurs états associés à la situation économique de l'emprunteur dont trois types de bénéficiaires B 1 (état d'être bénéficiaire au temps t = 0), B 2 (état d'être bénéficiaire au temps t = 1) et I (état d'inclusion financière: bénéficiaire permanent), un état de demandeur A 1 et A T −1 ((T − 1) états d'exclus). Nous avons modélisé le comportement d'un emprunteur par un paramètre λ qui dépend de la probabilité α de réussite de l'emprunteur. A l'instant initial, λ = 1+α 1−α , cette quantité change dès que l'emprunteur passe d'un état à un autre avec une probabilité de réussite différente de α. La décision de l'agence d'accorder un crédit dépend entièrement du paramètre λ qui est comparé aux valeurs-seuils subjectives fixées. La chance γ d'avoir un prêt (γ: probabilité de demande de crédit accordée) pour un emprunteur est fonction du paramètre λ, avec γ = 1 − 1 λ. MOTS-CLÉS : Microfinance, Décision d'octroi de crédit, chaîne de Markov, Prêt individuel, Incitation dynamique, Profit espéré actualisé
    Date: 2019–10–01
  19. By: Tanja Jakimova (National Bank of the Republic of North Macedonia); Neda Popovska Kamnar (National Bank of the Republic of North Macedonia)
    Abstract: This paper presents the main findings of the Survey for bank financing to small and medium enterprises (SMEs). The key objective was to capture the main features of the “supply side” of SMEs financing in the Republic of North Macedonia and to identify institutional and policy constraints of banks involvement with SMEs. The findings reveals that banks considered SMEs lending market as large, competitive, not very saturated, but with very positive outlook. While the main driver for bank involvement with SMEs sector is profitability and the good prospects of the SME segment, a number of obstacles are present, including SME-related factors, macroeconomic factors, legal and contractual environment and some bank-specific factors. The overall conclusion is that SMEs access to finance should be further supported and encouraged in order to increase their contribution to growth of the economy.
    Keywords: small and medium enterprises, bank finance, survey data
    JEL: G20
    Date: 2019
  20. By: Altavilla, Carlo; Burlon, Lorenzo; Giannetti, Mariassunta; Holton, Sarah
    Abstract: Exploiting confidential data from the euro area, we show that sound banks pass negative rates on to their corporate depositors without experiencing a contraction in funding and that the tendency to charge negative rates becomes stronger as policy rates move deeper into negative territory. The negative interest rate policy (NIRP) provides stimulus to the economy through firms' asset rebalancing. Firms with high current assets linked to banks offering negative rates appear to increase their investment in tangible and intangible assets and to decrease their cash holdings to avoid the costs associated with negative rates. Overall, our results challenge the commonly held view that conventional monetary policy becomes ineffective when policy rates reach the zero lower bound.
    Keywords: corporate channel; Lending Channel; monetary policy; negative rates
    JEL: D2 E43 E52 G21
    Date: 2019–10
  21. By: Lagos, Ricardo; Zhang, Shengxing
    Abstract: We formulate a generalization of the traditional medium-of-exchange function of money in contexts where there is imperfect competition in the intermediation of credit, settlement, or payment services used to conduct transactions. We find that the option to settle transactions directly with money strengthens the stance of sellers of goods and services vis-a-vis intermediaries. We show this mechanism is operative even for sellers who never exercise the option to sell for cash, and that these latent money demand considerations imply monetary policy remains effective through medium-of-exchange channels even if the share of monetary transactions is arbitrarily small.
    Keywords: Cashless; credit; liquidity; monetary policy; money
    JEL: D83 E52 G12
    Date: 2019–10

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