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The Impact of Monetary Policy on Credit Growth: Evidence from Firm Level Micro Data

Author

Listed:
  • Arif Oduncu

    (Central Bank of the Republic of Turkey)

  • Fatih Altunok

    (Central Bank of the Republic of Turkey)

Abstract

We make use of a unique data set that includes loan and bank relationship information at the firm level to investigate the role of monetary policy on the loan growth of firms. We analyze how Turkish firms adjust their credit growth in response to unexpected monetary policy shocks. We use unexpected shocks instead of interest-rate changes in order to solve the possible endogeneity problem between monetary policy and credit growth. We show that unexpected monetary tightening has a significant effect on the decline of firm credit growth. This effect is larger for credit-constrained firms. We find that unexpected shocks are effective only for short term loans but are not effective for medium and longterm loans. We also show the asymmetric impact of monetary policy on loan growth. Our results are robust to firm characteristics, credit demand and firm financial performance factors as well as the firm-bank relationship.

Suggested Citation

  • Arif Oduncu & Fatih Altunok, 2015. "The Impact of Monetary Policy on Credit Growth: Evidence from Firm Level Micro Data," EY International Congress on Economics II (EYC2015), November 5-6, 2015, Ankara, Turkey 253, Ekonomik Yaklasim Association.
    • Handle: RePEc:eyd:cp2015:253
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    Keywords

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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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