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This paper considers the business strategy of some banks that provide relationship loans (where they have loan origination and monitoring advantages relative to capital markets) with core deposit funding (where they can pass along the benefit of a sticky price on deposits). These "Traditional banks" tend to lend out less than the deposits they take in, so they have a "Buffer stock" of core deposits. This buffer stock of core deposits can be used to mitigate the full effect of tighter monetary policy on their bank-dependent borrowers. In this manner, the business strategy of "Traditional banks" acts as a "Core deposit mitigation channel" to provide funds to bank dependent borrowers when there are monetary shocks.
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