The Bank Lending Channel: A FAVAR Analysis

Chetan Dave, Scott J. Dressler and Lei Zhang

Journal of Money, Credit and Banking, 2013, vol. 45, issue 8, 1705-1720

Abstract: We examine the bank lending channel (BLC) of monetary transmission in a factor‐augmented vector autoregression (FAVAR). A FAVAR exploits large numbers of macro‐economic indicators and allows us to consider an alternative identification of monetary shocks and analyze the lending response of banks at the aggregate and individual levels. We find that the existence of the BLC is more prevalent than previously thought using aggregated lending data, while the lending response of individual banks are driven more by specific innovations than monetary shocks. Nonetheless, the average individual bank response to a monetary shock is consistent with the existence of a BLC.

Date: 2013
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https://doi.org/10.1111/jmcb.12067

Related works:
Journal Article: The Bank Lending Channel: A FAVAR Analysis (2013)
Working Paper: The Bank Lending Channel: a FAVAR Analysis (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:45:y:2013:i:8:p:1705-1720

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