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The Impact of Monetary Policy on Bank Liquidity Management Strategies: Empirical Evidence from the Diamond-Dybvig Framework

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Empirical evidence shows monetary policy adjustments influence bank liquidity management, highlighting risk effects and regulatory roles.

Expansionary monetary policy increases banks' liquidity creation, but also raises risk-taking due to lower funding costs.
Large banks experience a 1.8 times greater optimization impact from structural monetary policy tools compared to smaller ones.
A 1 percentage point increase in the Liquidity Coverage Ratio requirement reduces monetary policy transmission efficiency by 0.15 standard deviations.
Bank-specific characteristics significantly moderate the effects of monetary policy on liquidity management strategies.

Bo Zhang (2025) studied this question.

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