Credit Supply and Monetary Policy: Identifying the Bank Balance-Sheet Channel with Loan Applications
Abstract:We analyze the impact of monetary policy on the supply of bank credit. Monetary policy affects both loan supply and demand, thus making identification a steep challenge. We therefore analyze a novel, supervisory dataset with loan applications from Spain. Accounting for time-varying firm heterogeneity in loan demand, we find that tighter monetary and worse economic conditions substantially reduce loan granting, especially from banks with lower capital or liquidity ratios; responding to applications for the same loan, weak banks are less likely to grant the loan. Finally, firms cannot offset the resultant credit restriction by applying to other banks.
Document Type: Research Article
Publication date: 2012-08-01
More about this publication?
- The American Economic Review is a general-interest economics journal. The journal is published quarterly and contains articles on a broad range of topics. Established in 1911, the AER is among the nation's oldest and most respected scholarly journals in the economics profession.
- Editorial Board
- Information for Authors
- Subscribe to this Title
- Membership Information
- Terms & Conditions
- e-Publications for AEA Members
- Ingenta Connect is not responsible for the content or availability of external websites