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Changes in Financial Structure and Asset Price Substitutability: A Test of the Bank Lending Channel

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  • Sophocles N. Brissimis

    ()
    (Bank of Greece, Economic Research Department and University of Piraeus)

  • Nicholas S. Magginas

    (Athens University of Economics and Business and National Bank of Greece)

Abstract

In this paper we develop a method for testing the implications of the Bernanke-Blinder model for monetary policy transmission. Multivariate cointegration techniques are used in a sample that includes six major industrial countries with data covering the last 25 years. Moreover, we examine whether changes in financial markets affected the degree of asset substitutability and thus the potency of the lending channel. We find that in the US and the UK, representing the “Anglo-Saxon type” of financial market structure, the lending channel is inoperative, while in Japan it is still important for monetary transmission. The other three European countries examined – Germany, France, Italy – are in between, with the lending channel losing its potency in the last decade.

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Bibliographic Info

Paper provided by Bank of Greece in its series Working Papers with number 05.

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Length: 36 pages
Date of creation: Sep 2003
Date of revision:
Publication status: Published in Economic Modelling, 2005, 22 (5), pp. 879-904
Handle: RePEc:bog:wpaper:05

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Keywords: Monetary transmission mechanism; bank lending channel; financial structure; multivariate cointegration;

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References

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Citations

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Cited by:
  1. Eleni Angelopoulou, 2005. "The Comparative Performance of Q-type and Dynamic Models of Firm Investment: Empirical Evidence from the UK," Working Papers 27, Bank of Greece.
  2. 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.
  3. Brissimis, Sophocles & Delis, Mannthos & Iosifidi, Maria, 2012. "Bank market power and monetary policy transmission," MPRA Paper 49206, University Library of Munich, Germany.
  4. Brissimis, Sophocles N. & Delis, Manthos D., 2009. "Identification of a loan supply function: A cross-country test for the existence of a bank lending channel," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(2), pages 321-335, April.
  5. Dimitrios Sideris, 2004. "Testing for Long-Run PPP in a System Context: Evidence for the US, Germany and Japan," Working Papers 19, Bank of Greece.
  6. Hondroyiannis, George & Lazaretou, Sophia, 2004. "Inflation persistence during periods of structural change: an assessment using Greek data," Working Paper Series 0370, European Central Bank.
  7. George A. Christodoulakis & Stephen E Satchell, 2006. "Exact Elliptical Distributions for Models of Conditionally Random Financial Volatility," Working Papers 32, Bank of Greece.
  8. Nicholas G. Zonzilos, 2004. "Econometric Modelling at the Bank of Greece," Working Papers 14, Bank of Greece.

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