This paper analyzes the implications of the gradual rise in bank concentration since the 1990s for the transmission of monetary policy. I use branch-level data on deposit and loan rates to evaluate the monetary policy pass-through conditional on the level of local bank concentration and bank capitalization. I find that banks operating in high-concentration markets and under-capitalized banks adjust short-term lending rates more. I then build a theoretical model with heterogeneous banks that rationalizes the empirical findings and explains the underlying mechanism. In the model, monopolistic competition in local deposit and loan markets, along with bank capital requirements, lead to frictions on the pass-through to the real economy. Counterfactual analyses highlight that the rise in bank concentration alters monetary policy pass-through by two channels: the market power and capital allocation channels. Both channels further strengthen monetary policy transmission to output and investment, amplify the credit cycle, and flatten the Phillips curve.
Presented at: European Central Bank, Board of Governors of the Federal Reserve, Banco Central de Chile, CEBRA annual meeting 2020, 2nd Workshop ``Women in Macro, Finance and Economic History'' (WIMFEH), 15th Economics Graduate Students' Conference (EGSC), University of Würzburg, 20th Annual FDIC/JFSR Bank Research Conference, SNDE 2022, Christian-Albrecht University of Kiel, IE University, Bank of England, LMU Munich, Norges Bank, Fairfield University, De Nederlandsche Bank, TU Dortmund, WU Vienna, Miami University, Federal Reserve Bank of Philadelphia, EEA Milano, MEG 2022, SNDE Symposium for Young Researchers, 4th EMMMC, CEPR Workshop Empirical Monetary Economics 2022, CRC Workshop "Global Crises, Financial Markets and the Role of Monetary Policy", EWMES 2022, 1st XAmsterdam Macroeconomic Workshop, University of Bonn.
We study the role of bank non-interest income in deposit pricing and monetary policy trans mission. Empirical evidence shows that banks with high deposit-related non-interest income charge higher fees, set higher deposit spreads, and exhibit lower deposit rate pass-through of monetary policy shocks. We develop and calibrate a banking model in which deposit rates and fees govern the intensive and extensive margins of deposit demand, respectively. Counterfactual analyses show that the relationship between non-interest income and deposit pricing is primarily driven by underlying differences in deposit market power, and that non-interest income has important implications for credit supply, bank risk, and deposit pricing.
Presented at: Federal Reserve Bank of Kansas City, T2M Amsterdam 2024, CEBRA Annual Meeting 2024, Midwest Macroeconomics Meetings Fall 2024, System Committee on Financial Institutions, Regulation, and Markets Conference 2024, SEA 94th Annual Meeting, Wisconsin-Queens IO-Finance Reading Group, SED 2025 in Copenhagen.
The post-pandemic surge in inflation led many unions and firms to alter their bargaining and wage-setting policies. Using novel German firm-level survey data, we document state dependence in wage setting across high and low inflation periods. Wage adjustment occurs along the extensive and intensive margins: the average duration of wage agreements shortens from 14.2 to 12.9 months, while adjustment per pay round increases from 2–4% to 4–6%. Newly compiled union-level panel data on collective bargaining outcomes confirm these patterns. These facts are difficult to reconcile with purely time-dependent wage-setting models but consistent with state-dependent wage setting. Using the observed wage-duration distributions, we quantify the extent to which the Generalized Wage Phillips Curve (GWPC) steepens in times of high inflation. Embedding the GWPC constructed from our firm-level and union-level data in a New Keynesian model, we find that the sacrifice ratio falls by about 13–23% in the high-inflation regime.
Presented at: 13th ifo Conference on Macroeconomics and Survey Data, Bavarian Macro Day, University of Graz, LMU Munich, ifo Institute, Verein für Socialpolitik, IAB/FAU seminar ”Macroeconomics and Labor Markets,” NBB Workshop on Macroeconomics and Survey Data, NOeG 5th Winter Workshop 2023, ifo Dresden Workshop on Macroeconomics and International Finance 2024, T2M Amsterdam 2024, Johannes Kepler University Linz, Schumpeter Berlin School of Economics Macro Seminar, IJCB Annual Conference 2024, Ghent University Workshop on Empirical Macroeconomics, CEPR MEF Annual Meeting 2024, Empirical Macroeconomics Workshop in Linz 2025, GIFT Conference Tilburg, EEA Bordeaux, University of Tübingen.
This paper presents new evidence that the global rise in corporate saving across major advanced economies over the last two decades is driven by large firms. Their rapid growth in gross profits as a share of corporate value added, coupled with sluggish growth in dividend payment, has been the main source for the differential change in saving rates between large and small firms. We develop a model where liquidity constraints and financial frictions amplify exogenous heterogeneity across firms. We illustrate how the trend decline in the global real interest rate can rationalize the observed pattern of rising granularity in corporate savings, as larger and less constrained firms are better able to exploit more profitable investment opportunities. These firms, in turn, grow more rapidly, endogenously causing higher concentration within industries.