EFFECTS OF MONETARY POLICY ON THE RETURNS OF SAVINGS INSTITUTIONS

Syed M. Harun
Josephine Sosa-Fey
Texas A&M University–San Antonio
ABSTRACT
This study examines the impact of monetary policy actions on the returns of savings
institutions. Monetary policy actions have asymmetric effects on returns across different monetary
policy environments. Additionally, the returns of savings institutions are statistically significantly
affected by positive policy surprises (larger than expected changes of the federal funds target rate)
while they are not significantly affected by negative policy surprises. It was also observed that the
effects of monetary policy on the savings institutions are asymmetric across different business
conditions, and the results are robust to different identification schemes of the business condition.
Evidence suggests that the effect of monetary policy on the returns of savings institutions in
positive business conditions is statistically significant compared to negative business conditions.