Banks' Loan Portfolio and the Monetary Transmission Mechanism

Wouter Den Haan, Steven Sumner and Guy Yamashiro
Authors registered in the RePEc Author Service: Wouter Denhaan ()

No 4725, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper compares the responses of bank loan components to a monetary tightening with the responses to negative output shocks. Real estate and consumer loans sharply decrease during a monetary tightening but not after a negative output shock. In contrast, C&I loans (and commercial paper) sharply decrease in response to output shocks, but not in response to a monetary tightening. These results are difficult to reconcile with a bank-lending channel of monetary transmission, in which the supply of commercial and industrial (C&I) loans is constrained. Hedging and bank capital regulation provide reasons why banks may want to substitute out of real estate and consumer loans, and into C&I loans during periods of high interest rates.

Keywords: Hedging; Bank capital regulation; Interest rates (search for similar items in EconPapers)
JEL-codes: E40 (search for similar items in EconPapers)
Date: 2004-11
New Economics Papers: this item is included in nep-mac, nep-mon and nep-reg
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Citations: View citations in EconPapers (2)

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Journal Article: Bank loan portfolios and the monetary transmission mechanism (2007)
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