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Transmission of monetary policy shocks in Finland: evidence from bank level data on loans

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Author Info
Jukka Topi () (Bank of Finland, P.O. Box 160, FIN-00101 Helsinki, Finland.)
Jouko Vilmunen () (Bank of Finland, P.O. Box 160, FIN-00101 Helsinki, Finland.)

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Abstract

We use a panel of quarterly time series observations spanning the period from 1995 to 2000 on Finnish banks to estimate reduced form equations for the growth rate of bank loans. By allowing for individual bank specific effects in the models that we estimate we specifically seek evidence of a bank-lending channel for the transmission of monetary policy shocks in Finland during the latter half of the 1990s. On the basis of our estimation results, we conclude that there is at most weak evidence in favour of the bank-lending channel for monetary policy shocks. Since our data overlaps with the post crisis recovery of the Finnish banking sector with specific government support measures still active during the good part of the sample period, we try to capture the effects of these measures through incorporating a policy dummy variable in our empirical model. This policy dummy enters the estimated equations highly significantly, suggesting that the measures themselves may have contributed to the growth rate of bank loans during the sample period. JEL Classification: E51; E52; G21.

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Paper provided by European Central Bank in its series Working Paper Series with number 100.

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Length: 53 pages
Date of creation: Dec 2001
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Handle: RePEc:ecb:ecbwps:20010100

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Related research
Keywords: Monetary policy; money view; credit view; banking crisis; GMM.;

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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.:
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    Other versions:
  2. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
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    Other versions:
  4. Arellano, M. & Honore, B., 2000. "Panel Data Models: Some Recent Developments," Papers 0016, Centro de Estudios Monetarios Y Financieros-.
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  5. Peter C.B. Phillips & Hyungsik R. Moon, 1999. "Nonstationary Panel Data Analysis: An Overview of Some Recent Developments," Cowles Foundation Discussion Papers 1221, Cowles Foundation, Yale University. [Downloadable!]
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  6. Jaaskela, J. & Vilmunen, J., 1999. "Anticipated Monetary Policy and the Dynamic Behaviour of the Term Structure of Interest Rate," Bank of Finland - Studies in Economics and Finance 12/99, Bank of Finland. Research Department..
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  9. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Monetary Policy Shocks: What Have We Learned and to What End?," NBER Working Papers 6400, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Arellano, Manuel, 1993. "On the testing of correlated effects with panel data," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 87-97, September. [Downloadable!] (restricted)
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  12. Stephen G. Cecchetti & Stefan Krause, 2001. "Financial Structure, Macroeconomic Stability and Monetary Policy," NBER Working Papers 8354, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Patrick Bolton & Xavier Freixas, 2000. "Equity, Bonds, and Bank Debt: Capital Structure and Financial Market Equilibrium under Asymmetric Information," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 324-351, April. [Downloadable!] (restricted)
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  20. N. Gregory Mankiw, 1994. "Monetary Policy," NBER Books, National Bureau of Economic Research, Inc, number greg94-1.
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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. Ignazio Angeloni & Anil K. Kashyap & Benoit Mojon & Daniele Terlizzese, 2003. "Monetary Transmission in the Euro Area: Does the Interest Rate Channel Explain it All?," NBER Working Papers 9984, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Jean-Bernard Chatelain & Andrea Generale & Philip Vermeulen & Michael Ehrmann & Jorge Martínez-Pagés & Andreas Worms, 2003. "Monetary policy transmission in the euro area: New evidence from micro data on firms and banks," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00119489_v2, HAL. [Downloadable!]
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  3. Nikolay Nenovsky & Evgeni Peev & Todor Yalamov, 2003. "Banks-Firms Nexus under the Currency Board: Empirical Evidence from Bulgaria," William Davidson Institute Working Papers Series 555, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  4. Ignazio Angeloni & Benoit Mojon & Anil K. Kashyap & Daniele Terlizzese, 2002. "Monetary transmission in the Euro Area: where do we stand?," Working Paper Series 114, European Central Bank. [Downloadable!]
  5. Michael Ehrmann & Leonardo Gambacorta & Jorge Martìnez-Pagès & Patrick Sevestre & Andreas Worms, 2001. "Fynancial Systems and the Role of Banks in Monetary Policy Transmission in the Euro area," Temi di discussione (Economic working papers) 432, Bank of Italy, Economic Research Department. [Downloadable!]
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  6. Putkuri , Hanna, 2003. "Cross-country asymmetries in euro area monetary transmission: the role of national financial systems," Research Discussion Papers 15/2003, Bank of Finland. [Downloadable!]
  7. Oleksandr Talavera & Andriy Tsapin & Oleksandr Zholud, 2006. "Macroeconomic Uncertainty and Bank Lending: The Case of Ukraine," Discussion Papers of DIW Berlin 637, DIW Berlin, German Institute for Economic Research. [Downloadable!]
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