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Is the Monetary Policy Effect Different for Bank Lending to Households and Firms?

Youngjin Yun () and Byoungsoo Cho ()
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Byoungsoo Cho: Bank of Korea

No GRU_2021_001, GRU Working Paper Series from City University of Hong Kong, Department of Economics and Finance, Global Research Unit

Abstract: Monetary policy may affect bank lending differently depending on who the borrower is. We examine both the price and quantity of bank loans in Korea for the 10 years between 2010 and 2019 to study whether the bank lending channel differs for households and firms. Identifying the channel by comparing banks with different amounts of security holdings, we find that the monetary policy effect is significant in business loans, but not in household loans. Evidence suggests that the difference in loan maturities is the reason behind it. Business loans typically have shorter maturities than household loans. Thus, the share of new or refinancing loans, which are more directly influenced by monetary policy shocks, is higher in business loans than in household loans. Our findings provide important policy implications for the cases where household and business sector debts evolve in different directions.

Keywords: monetary policy; bank lending channel; business loans; household loans (search for similar items in EconPapers)
JEL-codes: E3 E5 G2 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2021-01-01
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cwa, nep-mac and nep-mon
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