Three Essays On The Bank Lending Channel

Monetary policy is commonly assumed to impact on commodity demand via relative prices. The bank lending channel (BLC) proposes an additional effect via the quantity of loans. This has found its way into economic textbooks, although it remains empirically controversial. I present various theoretical criticisms of the BLC and its building block, the formal model by Bernanke and Blinder (1988). This model operates with lopsided loan demand, money demand and money supply functions. The logic of the BLC is valid for individual investors who are affected by a cut in bank loans. For a whole sector with a given level of interest rates a reduction of loans does not however dry up investment, but only the holding of money. Since 1988 academics have been using model by Bernanke and Blinder as a work horse to empirically address the question of the quantitative relevance of the BLC. Cecchetti (1995) und Hubbard (1995) summarize the overall evolution of the controversial debate up to then. The data used for the research is mainly from the United States. In this literature review, I mainly focus on the next and more recent cohort of empirical investigations on the BLC in Europe that follow papers by Kashyap and Stein (1995, 2000) and Kishan and Opiela (2000) on U.S. transmission mechanisms. It is crucial that these authors are the first to address the question using individual bank balance sheet data for the U.S. Until now, empirical research has produced largely inconsistent results. This is more revealing as many of these investigations have deficiencies in controlling for other transmission channels that relate to relative prices. The debate on how monetary policy works has not ended: the BLC, which stresses the importance of potential changes in the supply of loans as a result of monetary policy, and its subsequent impact on aggregate demand, became prominent recently, but the concluding empirical evidence is absent. I attempt to contribute to this debate by conducting a cross-section and panel data analysis of developed and developing countries and by choosing the availability of bank loans as a dependent variable. The latter circumvents identification problems that appear when analyzing the response of aggregated bank loans to monetary policy changes. This evidence finds no support for the prediction of the BLC that there is an additional channel of monetary transmission mechanism.

Level thesis:degree_level

thesis.doctoral

Grantor dc:publisher

Universität Passau

Year

2009

Author dc:creator

• Bajec, Luka

Contributors dc:contributor

• Graf Lambsdorff, Lambsdorff, Johann

• Monetäre Ökonomik
• Zentralbanktheorie
• Monetary Economics
• central banks
• bank loans

Statement dc:rights

• Standardbedingung laut Einverständniserklärung

Repository record source_url

https://opus4.kobv.de/opus4-uni-passau/frontdoor/index/index/docId/105

OAI identifier oai:identifier

oai:kobv.de-opus4-uni-passau:105