6533b82afe1ef96bd128cb02

RESEARCH PRODUCT

The Impact of Monetary Policy on Bank Profitability

Paula Cruz-garcía

subject

Net interest marginmedia_common.quotation_subjectMonetary policyEconomicsProfitability indexYield curveOecd countriesMonetary economicsNet interest incomePanel dataInterest ratemedia_common

description

This chapter analyzes the effect of the monetary policy on both net interest margin and bank profitability using a panel data from 31 OECD countries over the period 2000–2017. The main results show that expansionary monetary policy measures adopted in numerous economies had a negative impact on net interest margins and, therefore, on bank profitability. The relationship between interest rates and the slope of the yield curve with both the net interest margin and profitability is non-linear, more specifically concave. This suggests that the negative impact of low interest rates and the flat yield curve is greater the lower and flattened they are, respectively. Therefore, a potential normalization of monetary policy would have highly beneficial effects on restoring margins and profitability.

yearjournalcountryeditionlanguage
2020-01-01
https://doi.org/10.1007/978-3-030-45752-5_6