Changes in Financial Structure and Asset Price Substitutability: A Test of the Bank Lending Channel

Sophocles N. Brissimis () and Nicholas Magginas
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Nicholas Magginas: Athens University of Economics and Business and National Bank of Greece

No 5, Working Papers from Bank of Greece

Abstract: In this paper we develop a method for testing the implications of the Bernanke-Blinder model for monetary policy transmission. Multivariate cointegration techniques are used in a sample that includes six major industrial countries with data covering the last 25 years. Moreover, we examine whether changes in financial markets affected the degree of asset substitutability and thus the potency of the lending channel. We find that in the US and the UK, representing the “Anglo-Saxon type” of financial market structure, the lending channel is inoperative, while in Japan it is still important for monetary transmission. The other three European countries examined – Germany, France, Italy – are in between, with the lending channel losing its potency in the last decade.

Keywords: Monetary transmission mechanism; bank lending channel; financial structure; multivariate cointegration (search for similar items in EconPapers)
JEL-codes: C32 C52 E44 E52 (search for similar items in EconPapers)
Date: 2003-09
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Published in Economic Modelling, 2005, 22 (5), pp. 879-904

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Journal Article: Changes in financial structure and asset price substitutability: A test of the bank lending channel (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:bog:wpaper:05

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