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The Bank Lending Channel: a FAVAR Analysis

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Author Info
Chetan Dave () (School of Economic, Political and Policy Sciences at the University of Texas at Dallas)
Scott J. Dressler () (Department of Economics and Statistics, Villanova School of Business, Villanova University)
Lei Zhang (School of Economic, Political and Policy Sciences at the University of Texas at Dallas)

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Abstract

We examine the role of commercial banks in monetary transmission in a factor-augmented vector autoregression (FAVAR). A FAVAR exploits a large number of macroeconomic indicators to identify monetary policy shocks, and we add commonly used lending aggregates and lending data at the bank level. While our results suggest that the bank lending channel (BLC) is stronger than previously thought, this feature is not robust. In addition, our results indicate a diffuse response to monetary innovations when individual banks are grouped according to asset sizes and loan components. This suggests that other bank characteristics could improve the identification of the BLC.

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File URL: http://repec.library.villanova.edu/workingpapers/VSBEcon4.pdf
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Publisher Info
Paper provided by Villanova School of Business Department of Economics and Statistics in its series Villanova School of Business Department of Economics and Statistics Working Paper Series with number 4.

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Date of creation: Apr 2009
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Handle: RePEc:vil:papers:4

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Web page: http://www.villanova.edu/business/facultyareas/economics/
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Related research
Keywords: Bank Lending Channel; FAVAR; Monetary Policy;

Find related papers by JEL classification:
E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions

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This page was last updated on 2009-11-5.

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