The credit channel of monetary transmission in the US: Is it a bank lending channel, a balance sheet channel, or both, or neither?

Sophocles Brissimis and Michalis-Panayiotis Papafilis

No 300, Working Papers from Bank of Greece

Abstract: We develop a theoretical framework that extends the Bernanke and Blinder (1988) model to incorporate imperfect substitution between internal and external finance of firms in order to study the operation of both the bank lending and the balance sheet channels of monetary transmission in the US. Our model is used to quantify the financial accelerator effects due to the operation of these channels. Empirically, we employ multivariate cointegration techniques to identify the equilibrium relationships included in our model, and we provide evidence that only the balance sheet channel is operational for the period before and after the global financial crisis.

Keywords: Monetary transmission mechanism; bank lending channel; balance sheet channel; financial structure; multivariate cointegration (search for similar items in EconPapers)
JEL-codes: C32 C52 E44 E51 E52 (search for similar items in EconPapers)
Pages: 49
Date: 2022-07
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (5)

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