We quantify how banks' funding costs affect their lending behavior directly, and indirectly by feeding back to their net worth. For identification, we exploit banks' heterogeneous liability structure and the existence of regulated deposits in France whose rates are set by the government. Using...

We quantify how banks' funding costs affect their lending behavior directly, and indirectly by feeding back to their net worth. For identification, we exploit banks' heterogeneous liability structure and the existence of regulated deposits in France whose rates are set by the government. Using...