How Does the Strength of Monetary Policy Transmission Depend on Real Economic Activity?

Horacio Sapriza and Judit Temesvary

No 2019-023, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We study the relationship between the strength of the bank credit channel (BCC) of monetary policy and real GDP growth in the United States using quarterly commercial bank level data between 1986 and 2008. We find that the BCC was significantly stronger during periods of low economic growth. Monetary policy is more effective through this channel in spurring economic activity during periods of low growth, rather than in cooling the economy when growth is high. Furthermore, we find that the BCC operated through a broader range of loan categories and banks than previously documented, underscoring this channel?s economic relevance.

Keywords: Bank balance sheet; Bank lending channel; GDP growth; Monetary policy transmission (search for similar items in EconPapers)
JEL-codes: E3 E5 G2 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2019-04-08
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2019-23

DOI: 10.17016/FEDS.2019.023

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