1. Trusting the bankers: A new look at the credit channel of monetary policy
- Author
-
José-Luis Peydró, Angela Maddaloni, and Matteo Ciccarelli
- Subjects
Inflation ,Economics and Econometrics ,media_common.quotation_subject ,Monetary policy ,monetary policy ,Monetary economics ,credit channel ,bank lending channel, credit channel, credit crunch, Lending standards, monetary policy, Non-financial borrower balance-sheet channel ,Market liquidity ,Credit channel ,Shock (economics) ,Loan ,credit crunch ,Financial crisis ,Economics ,ddc:330 ,E44 ,Credit crunch ,G21 ,bank lending channel ,credit supply ,G01 ,media_common ,E32 ,firm and household balance-sheet channels - Abstract
To identify the credit channel we disentangle loan supply and demand shocks by using the answers from the confidential Euro area Bank Lending Survey and the U.S. Senior Loan Officer Survey. Embedding this information within a VAR model, we find that: (1) The credit channel of monetary policy is operational through the balancesheets of both banks and non-financial borrowers, and for business, mortgage, and consumer loans. (2) The impact of a monetary policy shock on GDP growth is higher through loan supply than through loan demand, whereas the latter affects more inflation. (3) The bank lending channel is stronger than the balance-sheet channel for firms, whereas the latter is stronger for households. (4) During the recent financial crisis, bank capital and liquidity problems had a strong negative impact on GDP growth by reducing loan supply to businesses. At the same time, the current expansionary monetary policy stance has reduced output decline in the Euro area.
- Published
- 2015