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The bank lending channel of monetary policy: identification and estimation using Portuguese micro bank data

Author

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  • Farinha, Luísa
  • Robalo Marques, Carlos

Abstract

This paper investigates the existence of the bank-lending channel in the transmission of monetary policy using Portuguese micro bank data. In contrast to the conventional approach, which addresses the identification issue by resorting to reduced form equations for bank credit with variables in differences, we directly estimate loan-supply schedules with variables in levels, thereby exploiting recent results on cointegration for panel data. We conclude that there is evidence of the existence of a bank-lending channel, and that the importance of the bank lending-channel is larger for less capitalised banks JEL Classification: C33, E44, E52, G21

Suggested Citation

  • Farinha, Luísa & Robalo Marques, Carlos, 2001. "The bank lending channel of monetary policy: identification and estimation using Portuguese micro bank data," Working Paper Series 102, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2001102
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    Keywords

    bank lending channel; identification; Monetary policy transmission mechanism;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • 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
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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