New evidence on the lending channel

Adam B. Ashcraft ()

No 136, Staff Reports from Federal Reserve Bank of New York

Abstract: Do banks play a special role in the transmission mechanism of monetary policy? I use the presence of internal capital markets in bank holding companies to isolate plausibly exogenous variation in the financial constraints faced by subsidiary banks. In particular, I demonstrate that affiliated bank loan growth is less sensitive to changes in the federal funds rate than that of unaffiliated banks, and that these relatively unconstrained banks are better able to smooth insured deposit outflows by issuing uninsured debt. State loan growth also becomes less sensitive to changes in the federal funds rate as loan market share of affiliated banks increases, but state output growth is largely unaffected.

Keywords: Bank loans; Capital market; Monetary policy (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn and nep-mon
Date: 2001
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Journal Article: New Evidence on the Lending Channel (2006)
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