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How Important is the Credit Channel in the Transmission of Monetary Policy?

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  • Valerie A. Ramey

Abstract

This paper empirically tests the importance of the credit channel in the transmission of monetary policy. Three credit variables are analyzed: total bank loans, bank holdings of securities relative to loans, and the difference in the growth rate of short-term debt of small and large firms. In order to determine the marginal effect of the credit channel over the standard money channel, the significance of the credit variables is studied in a model that includes money (M2). In most cases, the credit variables play an insignificant role in the impact of monetary policy shocks on output.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4285.

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Date of creation: Mar 1993
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Publication status: published as Carnegie-Rochester Conference Series on Public Policy, Fall 1993
Handle: RePEc:nbr:nberwo:4285

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