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The Bank Lending Channel: a FAVAR Analysis

Chetan Dave (), Scott Dressler () and Lei Zhang ()

No 4, Villanova School of Business Department of Economics and Statistics Working Paper Series from Villanova School of Business Department of Economics and Statistics

Abstract: We examine the role of commercial banks in monetary transmission in a factor-augmented vector autoregression (FAVAR). A FAVAR exploits a large number of macroeconomic indicators to identify monetary policy shocks, and we add commonly used lending aggregates and lending data at the bank level. While our results suggest that the bank lending channel (BLC) is stronger than previously thought, this feature is not robust. In addition, our results indicate a diffuse response to monetary innovations when individual banks are grouped according to asset sizes and loan components. This suggests that other bank characteristics could improve the identification of the BLC.

Keywords: Bank Lending Channel; FAVAR; Monetary Policy (search for similar items in EconPapers)
JEL-codes: E51 E52 C32 (search for similar items in EconPapers)
Date: 2009-04
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Journal Article: The Bank Lending Channel: A FAVAR Analysis (2013) Downloads
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