What Do a Million Banks Have to Say About the Transmission of Monetary Policy?

Anil Kashyap () and Jeremy Stein ()

No 6056, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In an effort to shed new light on the monetary transmission mechanism, we create a panel data set that includes quarterly observations of every insured commercial bank in the United States over the period 1976-1993. Our key cross-sectional finding is that the impact of monetary policy on lending behavior is significantly more pronounced for banks with less liquid balance sheets -- i.e., banks with lower ratios of cash and securities to assets. Moreover, this result is entirely attributable to the smaller banks in our sample, those in the bottom 95% of the size distribution. Among other things, our findings provide strong support for the existence of a lending channel

Date: 1997-06
Note: CF EFG ME
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