Identifying the balance sheet and the lending channels of monetary transmission: A loan-level analysis

We make a novel attempt at comparing the strength of the lending and balance sheet channels of monetary transmission. To make this comparison, we use loan-level data to determine how borrower balance sheets and bank liquidity are related to bank lending decisions and how monetary policy can affect t...

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Bibliographic Details
Published inJournal of banking & finance Vol. 37; no. 8; pp. 2812 - 2822
Main Authors Aysun, Uluc, Hepp, Ralf
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.08.2013
Elsevier Sequoia S.A
Subjects
Balance sheet channel
Balance sheets
Bank liquidity
Bank loans
Borrowing
Financial information
Financial services
Lending
Lending channel
Loan-level data
Monetary policy
Monetary systems
Monetary transmission
Studies
Transmission mechanism
E51
E52
E44
Balance sheet channel
Monetary transmission
G21
Loan-level data
Lending channel
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Summary:We make a novel attempt at comparing the strength of the lending and balance sheet channels of monetary transmission. To make this comparison, we use loan-level data to determine how borrower balance sheets and bank liquidity are related to bank lending decisions and how monetary policy can affect these relationships. The key innovation in this paper is the use of loan-level data. This enables us to measure the independent effects of the two channels and directly account for borrower balance sheets and lender liquidity instead of using proxies. Our results show that the balance sheet channel is the main mechanism through which monetary policy shocks are transmitted to the economy and that the lending channel does not play a significant role.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0378-4266
1872-6372
DOI:10.1016/j.jbankfin.2013.04.006