The Bank Lending Channel of Monetary Policy Has Real Effects

Anne-Laure Delatte, Pranav Garg and Jean Imbs

No 19502, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Using a unique identification methodology, we provide evidence that easing collateral requirements has economy-wide causal effects on firms' real outcomes, through increased credit. These effects extend beyond firms with newly eligible collateral because the credit expansion benefits all firms. We categorize banks based on their pre-reform loan portfolios, allowing us to compare banks with varying exposures to the change in collateral constraints but otherwise similar loan portfolios. We introduce a bank-level metric for firms’ real outcomes, calculated as a loan-weighted average across borrowers, which enables us to use the same identification for both credit and real effects. The effects on credit and on firms' investment, productivity, and dividends are large.

Keywords: Bank lending channel; Collateral constraints; Credit supply; Real effects of monetary policy (search for similar items in EconPapers)
JEL-codes: E44 E58 G21 G32 (search for similar items in EconPapers)
Date: 2024-09
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