From Bank Lending Standards to Bank Credit Conditions: An SVAR Approach

Vihar Dalal, Daniel Dias and Pinar Uysal
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Pinar Uysal: https://www.federalreserve.gov/econres/pinar-uysal.htm

No 2025-055, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper uses a structural vector autoregressive (SVAR) model—identified with an external monetary policy instrument and sign restrictions—to derive a measure of bank credit conditions from changes in bank lending standards. The model incorporates data on interest rates, bank credit, and survey-based measures of bank lending standards to identify monetary policy, credit demand, and credit supply shocks. Using these identified shocks, we construct a novel measure of bank credit conditions that corresponds to the component of credit growth that would occur if credit demand remained unchanged, reflecting solely the impacts of monetary policy and credit supply shocks. Using this measure, we find that credit supply–driven changes in bank credit conditions have a stronger impact on real outcomes in the euro area, whereas monetary policy–driven changes play a larger role in the U.S. economy.

Keywords: Bank Credit; Bank Lending Surveys; Monetary Policy; External Instruments; Sign Restrictions; SVAR (search for similar items in EconPapers)
JEL-codes: C32 C36 G21 (search for similar items in EconPapers)
Pages: 50 p.
Date: 2025-08-04
New Economics Papers: this item is included in nep-cba, nep-fdg and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2025-55

DOI: 10.17016/FEDS.2025.055

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