Bank capital, loan activity, and monetary policy: evidence from the FDIC’s Historical Statistics on Banking

Paul E. Orzechowski ()
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Paul E. Orzechowski: CUNY – College of Staten Island

Journal of Economics and Finance, 2017, vol. 41, issue 2, No 11, 392-407

Abstract: Abstract This study utilizes the FDIC’s Historical Statistics on Banking from 1966 to 2013 to analyze the long-run relationship between federal funds rate policy, bank capital, and lending at U.S. commercial banks. The empirical analysis uses an autoregressive model to examine loan activity between two different groups of banks with different bank capital structures (high and low capital banks). The results of the study show that commercial loans at high capital banks have a stronger relationship to changes in the federal funds rates than low capital banks. Real estate loans show a slightly stronger negative correlation with federal funds for high capital banks than banks with low capital levels. The change in the portfolio ratio between real estate to commercial loans is negatively related to monetary policy changes.

Keywords: Bank capital; Bank loans; Loan portfolio; Monetary policy (search for similar items in EconPapers)
JEL-codes: E44 E52 G32 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s12197-016-9359-5

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