Identifying the Macroeconomic Effect of Loan Supply Shocks

Joe Peek, Eric Rosengren () and Geoffrey Tootell

Journal of Money, Credit and Banking, 2003, vol. 35, issue 6, 931-46

Abstract: The inability to clearly distinguish the effects of shocks to loan supply from those to loan demand has made it difficult to quantify the economic importance of the credit channel in the transmission mechanism of monetary policy. This study provides an innovative approach to identifying loan supply shocks. Three different results confirm that loan supply shocks have been successfully isolated from shifts in loan demand. Our measure is particularly important for explaining inventory movements, the component of GDP most dependent on bank lending; the effect is present even during periods with strong loan demand; and the effect remains even when the unpredictable part of the loan supply shock is isolated. This identification enables us to show that loan supply shocks have had economically important effects on the U.S. economy.

Date: 2003
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Related works:
Working Paper: Identifying the Macroeconomic Effect of Loan Supply Shocks (2010)
Working Paper: Identifying the macroeconomic effect of loan supply shocks (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:35:y:2003:i:6:p:931-46

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