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Market structure and the pass-through of the federal funds rate

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  • Adams, Robert M.
  • Amel, Dean F.
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    Abstract

    We study the effect of local market bank concentration on business loan originations and on the pass-through of the federal funds rate to business loan originations. Economic theory on the relationship between concentration and the pass-through of input prices to quantity (or price) is ambiguous. We find that more concentrated markets have lower business loan originations and experience smaller changes in business loan originations in response to changes in the federal funds rate. Our results support the idea that market concentration dampens quantity reactions to input price changes.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 35 (2011)
    Issue (Month): 5 (May)
    Pages: 1087-1096

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    Handle: RePEc:eee:jbfina:v:35:y:2011:i:5:p:1087-1096

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    Web page: http://www.elsevier.com/locate/jbf

    Related research

    Keywords: Market structure Monetary policy Federal funds rate;

    References

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    Cited by:
    1. Brämer, Patrick & Gischer, Horst & Richter, Toni & Weiß, Mirko, 2013. "Competition in banks’ lending business and its interference with ECB monetary policy," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 25(C), pages 144-162.
    2. Olivero, María Pía & Li, Yuan & Jeon, Bang Nam, 2011. "Consolidation in banking and the lending channel of monetary transmission: Evidence from Asia and Latin America," Journal of International Money and Finance, Elsevier, vol. 30(6), pages 1034-1054, October.
    3. Perera, Anil & Ralston, Deborah & Wickramanayake, J., 2014. "Impact of off-balance sheet banking on the bank lending channel of monetary transmission: Evidence from South Asia," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 195-216.

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