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Bank size and macroeconomic shock transmission: Does the credit channel operate through large or small banks?

Uluc Aysun ()

Journal of International Money and Finance, 2016, vol. 65, issue C, 117-139

Abstract: In this paper, I use U.S. call report data to construct a larger panel dataset with bank-level observations. I find that larger banks' lending is considerably more sensitive to the strength of their borrowers' and their own balance sheets compared to smaller banks and that the sensitivities to borrower balance sheets are larger in magnitude compared to lender balance sheets. When I incorporate various macroeconomic shocks (identified by an estimated DSGE model) into the empirical model, I similarly find that the transmission of shocks to the real economy operates mostly through large bank lending and borrower balance sheets.

Keywords: Bank size; Credit channel; Call report data; DSGE model (search for similar items in EconPapers)
JEL-codes: E44 E32 G21 E02 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1016/j.jimonfin.2016.04.001

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