Monetary policy and bank lending to small firms

John Kandrac

Journal of Macroeconomics, 2012, vol. 34, issue 3, 741-748

Abstract: This paper presents an empirical test of the balance sheet channel of monetary policy. I take advantage of a panel data set containing nearly all domestic banks to search for an adjustment in lending patterns induced by changes in the stance of monetary policy. I find that in response to monetary policy tightening, banks decrease the proportion of credit extended to high-agency-cost “small” borrowers. Additionally, I provide evidence that this result is in fact driven by a balance sheet effect working on small borrowers rather than on small lenders.

Keywords: Credit channel; Balance sheet channel; Banking industry; Monetary policy (search for similar items in EconPapers)
JEL-codes: E51 E52 G21 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:34:y:2012:i:3:p:741-748

DOI: 10.1016/j.jmacro.2012.06.002

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