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In Quest of the Bank Lending Channel: Evidence for Switzerland using Individual Bank Data

Robert Bichsel and Josef Perrez

Swiss Journal of Economics and Statistics (SJES), 2005, vol. 141, issue II, 165-190

Abstract: We study the role of bank capital and liquidity in the transmission of monetary policy in Switzerland. Using a large set of data, we test the assumptions that the effect of a change in the monetary policy stance on a bank's lending activity depends (i) on its capital (the bank capital channel) and (ii) on its liquidity base (the "traditional" bank lending channel). Our findings are consistent with the first hypothesis: lending by banks with a relatively weak capital base reacts more to a change in the monetary policy stance than lending by better capitalised banks. Liquidity, on the other hand, does not appear to play a role in this context. This result constitutes evidence for the existence of a bank lending channel in Switzerland.

Keywords: monetary policy; transmission mechanisms; bank lending channel; bank capital channel; Switzerland (search for similar items in EconPapers)
JEL-codes: E44 E52 G32 (search for similar items in EconPapers)
Date: 2005
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