Trusting the bankers: a new look at the credit channel of monetary policy

Matteo Ciccarelli, Angela Maddaloni and Jose-Luis Peydro

No 1228, Working Paper Series from European Central Bank

Abstract: Any empirical analysis of the credit channel faces a key identification challenge: changes in credit supply and demand are difficult to disentangle. To address this issue, we use the detailed answers from the US and the confidential and unique Euro area bank lending surveys. Embedding this information within a standard VAR model, we find that: (1) the credit channel is active through the balance-sheets of households, firms and banks; (2) the credit channel amplifies the impact of a monetary policy shock on GDP and inflation; (3) for business loans, the impact through the (supply) bank lending channel is higher than through the demand and balance-sheet channels. For household loans the demand channel is the strongest; (4) during the crisis, credit supply restrictions to firms in the Euro area and tighter standards for mortgage loans in the US contributed significantly to the reduction in GDP. JEL Classification: E32, E44, E5, G01, G21

Keywords: bank lending channel; credit channel; credit crunch; Lending standards; monetary policy; Non-financial borrower balance-sheet channel (search for similar items in EconPapers)
Date: 2010-07
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-mac and nep-mon
Note: 224580
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (141)

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Related works:
Journal Article: Trusting the Bankers: A New Look at the Credit Channel of Monetary Policy (2015)
Journal Article: Trusting the bankers: A new look at the credit channel of monetary policy (2015)
Working Paper: Trusting the bankers: A new look at the credit channel of monetary policy (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20101228

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