Is there a broad credit channel for monetary policy?
AbstractUsing data for the U.S. manufacturing sector, we test for the existence of a broad credit channel for monetary policy, which operates through the total supply of loans. Our test focuses on the relationship between internal funds and business investment. After a monetary tightening, we find that this relationship becomes much closer for small firms but not for large firms. In contrast, after a monetary easing, the relationship is little changed for all firms. This evidence supports the existence of a broad credit channel.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Working Paper Series / Economic Activity Section with number 146.
Date of creation: 1994
Date of revision:
Other versions of this item:
- Stephen D. Oliner & Glenn D. Rudebusch, 1996. "Is there a broad credit channel for monetary policy?," Economic Review, Federal Reserve Bank of San Francisco, pages 3-13.
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