Document Type

Honors Thesis


Although price stability is the main objective of most central banks, they also have an interest in promoting banking sectors that are both stable and efficient. Previous studies have found that bank profitability is positively associated with the monetary policy rate which indicates a traditional banking profitability pattern. This paper aims to determine whether the traditional banking profitability pattern has been followed by US and European banks through studying the relationship between monetary policy and bank performance for the 10 largest US and European Banks after the 2008 financial crisis. The model is estimated from univariate regression analysis of the bank performance measures of the largest banks in US and Euro area along with the policy rates of the respective regions for the past decade. The results indicate that the large European banks do follow the traditional banking profitability pattern and the large US banks do not follow the traditional banking profitability pattern.

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