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Credit supply and monetary policy: Identifying the bank balance-sheet channel with loan applications

Gabriel Jimenez, Steven Ongena, Jose-Luis Peydro () and Jesús Saurina

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We analyze the impact of monetary policy on the supply of bank credit. Monetary policy affects both loan supply and demand, thus making identification a steep challenge. We therefore analyze a novel, supervisory dataset with loan applications from Spain. Accounting for time-varying firm heterogeneity in loan demand, we find that tighter monetary and worse economic conditions substantially reduce loan granting, especially from banks with lower capital or liquidity ratios; responding to applications for the same loan, weak banks are less likely to grant the loan. Finally, firms cannot offset the resultant credit restriction by applying to other banks.

JEL-codes: E32 E44 E5 G21 G28 (search for similar items in EconPapers)
Date: 2010-09, Revised 2011-09
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Journal Article: Credit Supply and Monetary Policy: Identifying the Bank Balance-Sheet Channel with Loan Applications (2012) Downloads
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