Yevhenii Usenko

I exploit differences between large and small deposits to study the role of depositor inattention in shaping the deposits channel of monetary policy. Using data on U.S. commercial banks since 1975, I document that rates on large deposits are significantly more sensitive to market rates—with implied pass-through more than double that of small deposits. Yet, large deposits flow out more strongly in response to monetary policy shocks and account for the entire aggregate deposit response. The fact that small deposits do not flow out despite the low and insensitive rates points to inattention rather than local deposit market concentration as the primary driver of the low rate pass-through for retail deposits. I provide additional evidence that local deposit market concentration plays a limited role in retail deposits' response to monetary policy. My results imply that the deposits channel works through large, attentive depositors.

We study the mechanisms driving bank losses across historical banking crises in 46 economies and the effectiveness of policy interventions in restoring bank capitalization. We find that bank stocks experience large, permanent declines at the onset of crises. These losses predict commensurate long-term declines in banks' earnings and dividends, rather than elevated future equity returns. Bank losses are primarily driven by write-downs of nonperforming assets, not asset sales during panics. Forceful liquidity-based interventions during crises predict only small, temporary increases in bank market value. Overall, these results suggest that bank losses during crises are not primarily due to temporary price dislocations. Early liquidity interventions can avert banking crises, but only under specific conditions. Once large bank equity declines have occurred, policy responses have historically failed to prevent persistent undercapitalization in the banking sector.

U.S. corporate taxation is not neutral to inflation. Two of its features—historical cost depreciation and FIFO inventory accounting—have been hypothesized to lower real after-tax corporate cash flows and, thereby, make investment less attractive when expected inflation is elevated. Using Compustat data for 1965-1980 and a difference-in-differences research design, I do not find evidence in support of this hypothesis. I discuss possible explanations for this null result. I find a robust effect of statutory tax changes on corporate investment during the Great Inflation. The effect is economically meaningful and consistent with the prior literature: a tax reform that increases firm's cost of capital by 10% lowers investment of affected firms by 2 percentage points of total assets relative to firms not affected by the reform.