This paper derives some insights into the monetary policy specialness of banking firms, relative to commercial firms, from an analysis of the sensitivity of their stock returns to monetary policy changes. The results indicate that banks are "special" in the sense that the activity/balance-sheet regulation forces them to bear unnecessary interest rate risk. The evidence supports the view that eliminating the separation of banking from commerce would produce a banking system that is less sensitive to interest rate risk.
ASJC Scopus subject areas
- Business, Management and Accounting(all)
- Economics and Econometrics