Inside the Black Box: The Credit Channel of Monetary Policy Transmission

Ben Bernanke and Mark Gertler

Journal of Economic Perspectives, 1995, vol. 9, issue 4, 27-48

Abstract: The 'credit channel' theory of monetary policy transmission holds that informational frictions in credit markets worsen during tight-money periods. The resulting increase in the external finance premium--the difference in cost between internal and external funds--enhances the effects of monetary policy on the real economy. The authors document the responses of GDP and its components to monetary policy shocks and describe how the credit channel helps explain the facts. They discuss two main components of this mechanism, the balance sheet and bank lending channels. The authors argue that forecasting exercises using credit aggregates are not valid tests of this theory.

JEL-codes: E52 (search for similar items in EconPapers)
Date: 1995
Note: DOI: 10.1257/jep.9.4.27
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2708)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/jep.9.4.27 (application/pdf)

Related works:
Working Paper: Inside the Black Box: The Credit Channel of Monetary Policy Transmission (1995)
Working Paper: Inside the Black Box: The Credit Channel of Monetary Policy Transmission (1995)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:jecper:v:9:y:1995:i:4:p:27-48

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

Journal of Economic Perspectives is currently edited by Enrico Moretti

More articles in Journal of Economic Perspectives from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().