Economics at your fingertips  

Bank loan components, uncertainty and monetary transmission mechanism

Ekaterina Pirozhkova ()

No 1702, BCAM Working Papers from Birkbeck Centre for Applied Macroeconomics

Abstract: We study the dynamic characteristics of bank loan components and seek to resolve the puzzle raised by den Haan et al. (2007) that commercial and industrial loans increase following monetary contraction. By estimating a set of structural vector autoregression models on US data for 1954-2015, we demonstrate that when risk and balance sheet factors are controlled for, business loans decrease after monetary tightening, what is consistent with bank-lending channel of monetary policy transmission mechanism. This result is robust to VAR specification and to the measure of uncertainty employed. We distinguish between volatility measures of uncertainty and measures of uncertainty as vagueness/”unknownness” of economic outlook and show that business loans go down following uncertainty shock only after the latter uncertainty measure is used. We demonstrate that controlling for risk factors is critical for explaining the dynamic properties of business loans, as variance of business loans is driven by innovations to uncertainty and credit risk to the greater extent than by innovations to macroeconomic variables.

Keywords: uncertainty; bank loans; vector autoregression. (search for similar items in EconPapers)
JEL-codes: E40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
Date: 2017-02
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) First version, 2017 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in BCAM Working Papers from Birkbeck Centre for Applied Macroeconomics Malet St.,London WC1E 7HX, UK.
Bibliographic data for series maintained by ().

Page updated 2019-04-19
Handle: RePEc:bbk:bbkcam:1702