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Bank lending standards and the U.S. economy

Author

Listed:
  • Broadbent, Elijah
  • Ennis, Huberto M.
  • Pike, Tyler J.
  • Sapriza, Horacio

Abstract

The provision of bank credit to firms and households affects macroeconomic performance. We use survey measures of changes in bank lending standards, disaggregated by loan category, to quantify the effect of changes in banks’ attitudes toward lending on aggregate output, inflation, and interest rates. Bank lending to businesses is particularly important for macroeconomic outcomes, with peak effects on output growth of around 30 to 40 basis points after four quarters of the initial shock. These effects depend on the stage of the business cycle and the proximity of the short-term interest rate to its effective lower bound. The effects are larger when output is growing below trend, when uncertainty is increasing or high, and when interest rates are away from the lower bound. We also find that the response of the economy to lending-standards shocks is asymmetric, with tightening shocks having larger effects on output.

Suggested Citation

  • Broadbent, Elijah & Ennis, Huberto M. & Pike, Tyler J. & Sapriza, Horacio, 2026. "Bank lending standards and the U.S. economy," Journal of Economic Dynamics and Control, Elsevier, vol. 183(C).
    • Handle: RePEc:eee:dyncon:v:183:y:2026:i:c:s0165188925002131
    DOI: 10.1016/j.jedc.2025.105247
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    Keywords

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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