The role of uncertainty in the transmission of monetary policy effects on bank lending

Christopher Baum (), Mustafa Caglayan () and Neslihan Ozkan

No 561, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: In this paper we re-examine commercial banks' lending behavior taking into account changes in the stance of monetary policy in conjunction with changes in financial sector uncertainty. Using a very large data set covering all banks in the US between 1986-2000, we show that financial uncertainty has an important and significant role in the monetary policy transmission mechanism that varies across bank categories and the strength of banks' balance sheets. We find support for the existence of a bank lending channel among US banks.

Keywords: banks; lending; monetary policy; financial uncertainty; liquidity constraints (search for similar items in EconPapers)
JEL-codes: E44 E52 G32 (search for similar items in EconPapers)
Date: 2003-06-06, Revised 2008-04-28
Note: Previously circulated as "Re-examining the Transmission of Monetary Policy: What More Do a Million Observations Have to Say"
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