The State and the Capital: A study of monetary policy and its' effect on commercial bank profitability
(2024) NEKN01 20241Department of Economics
- Abstract
- This paper explores the role of the Swedish central bank in relation to the profitability of commercial banks. Utilizing local projection analysis, we examine the effect of policy rate and quantitative easing shocks from 2000 to 2023. Our study yields nuanced findings compared to the existing literature. In contrast to earlier studies, our findings indicate a negative effect of the policy rate on bank profitability, which we attribute to the potential economic downturn associated with an increased policy rate. Conversely, in line with other studies, we find that quantitative easing has a significant and positive effect on bank profitability. We argue that this effect is driven by the balance sheet adjustments generated by quantitative... (More)
- This paper explores the role of the Swedish central bank in relation to the profitability of commercial banks. Utilizing local projection analysis, we examine the effect of policy rate and quantitative easing shocks from 2000 to 2023. Our study yields nuanced findings compared to the existing literature. In contrast to earlier studies, our findings indicate a negative effect of the policy rate on bank profitability, which we attribute to the potential economic downturn associated with an increased policy rate. Conversely, in line with other studies, we find that quantitative easing has a significant and positive effect on bank profitability. We argue that this effect is driven by the balance sheet adjustments generated by quantitative easing. By shedding light on these dynamics, our study contributes to a deeper understanding of the relationship between monetary policy and bank profitability. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9170477
- author
- Sandin, Thea LU and Ryd, Isabell LU
- supervisor
- organization
- course
- NEKN01 20241
- year
- 2024
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Bank profits, Monetary policy, Quantitative easing, SVAR
- language
- English
- id
- 9170477
- date added to LUP
- 2024-10-01 13:09:14
- date last changed
- 2024-10-01 13:09:14
@misc{9170477, abstract = {{This paper explores the role of the Swedish central bank in relation to the profitability of commercial banks. Utilizing local projection analysis, we examine the effect of policy rate and quantitative easing shocks from 2000 to 2023. Our study yields nuanced findings compared to the existing literature. In contrast to earlier studies, our findings indicate a negative effect of the policy rate on bank profitability, which we attribute to the potential economic downturn associated with an increased policy rate. Conversely, in line with other studies, we find that quantitative easing has a significant and positive effect on bank profitability. We argue that this effect is driven by the balance sheet adjustments generated by quantitative easing. By shedding light on these dynamics, our study contributes to a deeper understanding of the relationship between monetary policy and bank profitability.}}, author = {{Sandin, Thea and Ryd, Isabell}}, language = {{eng}}, note = {{Student Paper}}, title = {{The State and the Capital: A study of monetary policy and its' effect on commercial bank profitability}}, year = {{2024}}, }