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Bank Lending Channel of Monetary Policy: Evidence for Colombia, Using a Firms´ Panel

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Author Info
José Eduardo Gómez ()
Paola Morales Acevedo ()

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Abstract

In this paper we find empirical evidence of bank lending channel for Colombia, using a balanced panel data of about four thousand non-financial firms. We find that increases in the interest rate, proxiing for the monetary policy instrument, lead to a reduction in the proportion of bank loans, out of total debt, of the .rms. This bank lending channel amplifies the effect of the traditional interest rate channel, which leads to a reduction in total debt and spending when monetary policy tightens. Our result agrees with, and complements, those obtained by Gómez González and Grosz (2007), who provide evidence of the existence of a bank lending channel in Colombia using bank-specific financial variables.

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Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 545.

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Handle: RePEc:bdr:borrec:545

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Keywords: Monetary transmission; bank lending channel; Colombia Classification JEL: E5; E52; E59; G21;

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References listed on IDEAS
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  1. Altunbas, Yener & Fazylov, Otabek & Molyneux, Philip, 2002. "Evidence on the bank lending channel in Europe," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2093-2110, November. [Downloadable!] (restricted)
  2. Ramey, Valerie, 1993. "How important is the credit channel in the transmission of monetary policy?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 1-45, December. [Downloadable!] (restricted)
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  3. Huang, Zhangkai, 2003. "Evidence of a bank lending channel in the UK," Journal of Banking & Finance, Elsevier, vol. 27(3), pages 491-510, March. [Downloadable!] (restricted)
  4. Christina D. Romer & David H. Romer, 1990. "New Evidence on the Monetary Transmission Mechanism," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1990-1), pages 149-214. [Downloadable!]
  5. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Bernanke, Ben & Gertler, Mark, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Working Papers 95-15, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
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  7. Kashyap, Anil K & Stein, Jeremy C & Wilcox, David W, 1993. "Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance," American Economic Review, American Economic Association, vol. 83(1), pages 78-98, March. [Downloadable!] (restricted)
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  8. Kashyap, Anil K. & Stein, Jeremy C., 1995. "The impact of monetary policy on bank balance sheets," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 42(1), pages 151-195, June. [Downloadable!] (restricted)
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  9. Bernanke, Ben S & Blinder, Alan S, 1988. "Credit, Money, and Aggregate Demand," American Economic Review, American Economic Association, vol. 78(2), pages 435-39, May. [Downloadable!] (restricted)
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  10. José Gómez-González & Fernando Grosz, 2007. "Evidence of a Bank Lending Channel for Argentina and Colombia," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 44(129), pages 109-126. [Downloadable!]
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