Heterogeneous Bank Lending Responses to Monetary Policy: New Evidence from a Real-time Identification
IMF Working Papers, May 22, 2013
Source details
- Canonical URL
- Heterogeneous Bank Lending Responses to Monetary Policy: New Evidence from a Real-time Identification
Other formats
Bibliographic details
- Authors: John C Bluedorn, Christopher Bowdler, Christoffer Koch
- Published: May 22, 2013
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484356760.001
Summary
- Authors: John C Bluedorn, Christopher Bowdler, Christoffer Koch
- Publication date: May 22, 2013
- Core contribution: Presents 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.
- Key methodological advance: Extends Romer and Romer (2004)’s identification scheme and expands the time and balance sheet coverage of the U.S. banking sample.
Main findings
- Using an exogenous policy measure identified from narratives on FOMC intentions and real-time economic forecasts, the study finds much greater heterogeneity in U.S. bank lending responses than that found in previous research based on realized federal funds rate changes.
- Studies using realized monetary policy changes likely confound the monetary policy’s effects with those of changes in expected macrofundamentals.
Methodology and data scope
- Identification strategy: Real-time identification based on narratives on FOMC intentions and real-time economic forecasts (extension of Romer and Romer (2004)’s scheme).
- Sample coverage: Expanded time coverage and expanded balance sheet coverage of the U.S. banking sample (details on exact sample periods and banks are provided in the Working Paper).
Policy-relevant implications
- Empirical implication: Research relying on realized federal funds rate changes may misattribute lending responses because realized changes mix monetary policy shocks with changes in expected macrofundamentals.
- Analytical implication: Real-time, narrative-based identification can reveal greater heterogeneity in bank lending responses and should be considered in studies of the lending channel and monetary transmission.
Subjects and keywords
- Subject: Bank credit, Banking, Financial institutions, Financial statements, Inflation, Loans, Monetary aggregates, Money, Prices, Public financial management (PFM)
- Keywords: bank characteristic, Bank credit, bank holding company, Banking, equity capital, exogenous monetary policy contraction, Financial statements, growth regression, Inflation, lending behavior, lending channel, lending growth, lending reduction, lending response, Loans, market driver, Monetary aggregates, Monetary Policy Identification, monetary policy policy change, Monetary Transmission, responses to monetary policy, WP