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How does monetary policy influence bank lending? Evidence from the market for banks' wholesale funding

Author

Listed:
  • Max Breitenlechner
  • Johann Scharler
Abstract
We study the transmission of monetary policy shocks to loan volumes using a structural VAR. To disentangle different transmission channels, we use aggregated data from the market for large certificates of deposits and apply a sign restrictions approach. We find that although the standard bank lending channel as well as the recently formulated risk-pricing channel (Disyatat, 2011; Kishan and Opiela, 2012) contribute to the transmission of policy shocks, the effects associated with the risk-pricing channel are quantitatively stronger. Our results also show that policy shocks give rise to non-negligible effects on loan demand.

Suggested Citation

  • Max Breitenlechner & Johann Scharler, 2018. "How does monetary policy influence bank lending? Evidence from the market for banks' wholesale funding," Working Papers 2018-01, Faculty of Economics and Statistics, Universität Innsbruck.
    • Handle: RePEc:inn:wpaper:2018-01
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    bank lending channel; risk-pricing channel; external finance premium; structural vector autoregression; sign restrictions;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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