The Bank Lending Channel Revisited

Piti Disyatat

Journal of Money, Credit and Banking, 2011, vol. 43, issue 4, 711-734

Abstract: A central proposition in research on the role of banks in the transmission mechanism is that monetary policy imparts a direct impact on deposits and that deposits act as the driving force of bank lending. This paper argues that the emphasis on policy‐induced changes in deposits is misplaced. A reformulation of the bank lending channel is proposed that works primarily through the impact of monetary policy on banks’ balance sheet strength and risk perception. Such a recasting implies, contrary to conventional wisdom, that greater reliance on market‐based funding enhances the importance of the channel.

Date: 2011
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https://doi.org/10.1111/j.1538-4616.2011.00394.x

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Journal Article: The Bank Lending Channel Revisited (2011)
Working Paper: The bank lending channel revisited (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:43:y:2011:i:4:p:711-734

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