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Monetary policy and bank lending to small firms

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  • Kandrac, John
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    Abstract

    This paper presents an empirical test of the balance sheet channel of monetary policy. I take advantage of a panel data set containing nearly all domestic banks to search for an adjustment in lending patterns induced by changes in the stance of monetary policy. I find that in response to monetary policy tightening, banks decrease the proportion of credit extended to high-agency-cost “small” borrowers. Additionally, I provide evidence that this result is in fact driven by a balance sheet effect working on small borrowers rather than on small lenders.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Macroeconomics.

    Volume (Year): 34 (2012)
    Issue (Month): 3 ()
    Pages: 741-748

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    Handle: RePEc:eee:jmacro:v:34:y:2012:i:3:p:741-748

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    Web page: http://www.elsevier.com/locate/inca/622617

    Related research

    Keywords: Credit channel; Balance sheet channel; Banking industry; Monetary policy;

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    Cited by:
    1. 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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