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Changes in bank lending standards and the macroeconomy

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Author Info

  • Bassett, William F.
  • Chosak, Mary Beth
  • Driscoll, John C.
  • Zakrajšek, Egon

Abstract

Identifying macroeconomic effects of credit shocks is difficult because many of the same factors that influence the supply of loans also affect the demand for credit. Using bank-level responses to the Federal Reserve's Loan Officer Opinion Survey, we construct a new credit supply indicator: changes in lending standards, adjusted for the macroeconomic and bank-specific factors that also affect loan demand. Tightening shocks to this credit supply indicator lead to a substantial decline in output and the capacity of businesses and households to borrow from banks, as well as to a widening of credit spreads and an easing of monetary policy.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 62 (2014)
Issue (Month): C ()
Pages: 23-40

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Handle: RePEc:eee:moneco:v:62:y:2014:i:c:p:23-40

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Web page: http://www.elsevier.com/locate/inca/505566

Related research

Keywords: Credit supply disruptions; Bank lending policies; Credit crunch;

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References

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Cited by:
  1. Tobias Adrian & Daniel Covitz & Nellie J. Liang, 2013. "Financial stability monitoring," Staff Reports 601, Federal Reserve Bank of New York.
  2. Haltenhof, Samuel & Jung Lee, Seung & Stebunovs, Viktors, 2014. "The credit crunch and fall in employment during the Great Recession," Journal of Economic Dynamics and Control, Elsevier, vol. 43(C), pages 31-57.

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