Skip to main content

LUP Student Papers

LUND UNIVERSITY LIBRARIES

The State and the Capital: A study of monetary policy and its' effect on commercial bank profitability

Sandin, Thea LU and Ryd, Isabell LU (2024) NEKN01 20241
Department 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:
author
Sandin, Thea LU and Ryd, Isabell LU
supervisor
organization
course
NEKN01 20241
year
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}},
}