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

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Author Info
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)

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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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File URL: http://www.bankofgreece.gr/BogEkdoseis/Paper200305.pdf
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Publisher 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
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Publication status: Published in Economic Modelling, 2005, 22 (5), pp. 879-904
Handle: RePEc:bog:wpaper:05

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

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Stephen D. Oliner & Glenn D. Rudebusch, 1995. "Is there a bank lending channel for monetary policy?," Economic Review, Federal Reserve Bank of San Francisco, pages 1-20. [Downloadable!]
  2. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May. [Downloadable!] (restricted)
  3. Oliner, Stephen D & Rudebusch, Glenn D, 1996. "Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance: Comment," American Economic Review, American Economic Association, vol. 86(1), pages 300-309, March. [Downloadable!] (restricted)
  4. Carlson, John B. & Hoffman, Dennis L. & Keen, Benjamin D. & Rasche, Robert H., 2000. "Results of a study of the stability of cointegrating relations comprised of broad monetary aggregates," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 345-383, October. [Downloadable!] (restricted)
    Other versions:
  5. Jensen, Michael C, 1988. "Takeovers: Their Causes and Consequences," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 21-48, Winter. [Downloadable!] (restricted)
  6. Gabriele Galati & Kostas Tsatsaronis, 2001. "The impact of the euro on Europe's financial markets," BIS Working Papers 100, Bank for International Settlements. [Downloadable!]
  7. Cobham, David & Serre, Jean-Marin, 2000. "A Characterization of the French Financial System," Manchester School, University of Manchester, vol. 68(1), pages 44-67, January. [Downloadable!] (restricted)
  8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  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. [Downloadable!]
  2. Sophocles N. Brissimis & Matthaios D. Delis, 2007. "Identification of a Loan Supply Function: A Cross-Country Test for the Existence of a Bank Lending Channel," Working Papers 54, Bank of Greece. [Downloadable!]
    Other versions:
  3. Christos Papazoglou, 2005. "Real Exchange Rate Dynamics and Output Contraction under Transition," Working Papers 29, Bank of Greece. [Downloadable!]
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