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Heterogeneous Bank Lending Responses to Monetary Policy : New Evidence from a Real-time Identification

Author/Editor: John C Bluedorn | Christopher Bowdler | Christoffer Koch
Authorized for Distribution: May 22, 2013
Electronic Access: Free Full Text (PDF file size is 1,497KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: We present new evidence on how heterogeneity in banks interacts with monetary policy changes to impact bank lending. Using an exogenous policy measure identified from narratives on FOMC intentions and real-time economic forecasts, we find much greater heterogeneity in U.S. bank lending responses than that found in previous research based on realized federal funds rate changes. Our findings suggest that studies using realized monetary policy changes confound the monetary policy’s effects with those of changes in expected macrofundamentals. We also extend Romer and Romer (2004)’s identification scheme, and expand the time and balance sheet coverage of the U.S. banking sample.
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Series: Working Paper No. 13/118
Subject(s): Monetary policy | Banking sector | Loans | Economic models
    Published:   May 22, 2013        
    ISBN/ISSN:   9781484356760/1018-5941   Format:   Paper
    Stock No:   WPIEA2013118   Pages:   39
    Price:   US$18.00
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