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The bank-lending channel empirically revisited

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  • Halvorsen, Jørn I.
  • Jacobsen, Dag Henning

Abstract

This study examines the role of bank equity and bank lending in the monetary transmission mechanism in Norway from January 1993 to August 2008. We apply linear and nonlinear vector-auto-regressive models (VARs) estimated using aggregate monthly data. The results provide support for a “risk-taking channel” in the form of a recasted bank-lending channel running through market-based wholesale funding, in which the impact of monetary policy depends on banks’ financial strength. When banks are weakly capitalized, results based on a nonlinear VAR show a larger monetary-policy effect on real activity.

Suggested Citation

  • Halvorsen, Jørn I. & Jacobsen, Dag Henning, 2016. "The bank-lending channel empirically revisited," Journal of Financial Stability, Elsevier, vol. 27(C), pages 95-105.
  • Handle: RePEc:eee:finsta:v:27:y:2016:i:c:p:95-105
    DOI: 10.1016/j.jfs.2016.10.004
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    References listed on IDEAS

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    Cited by:

    1. Ragna Alstadheim & Ørjan Robstad & Nikka Husom Vonen, 2017. "Financial imbalances, crisis probability and monetary policy in Norway," Working Paper 2017/21, Norges Bank.

    More about this item

    Keywords

    VAR; Nonlinearity; Bank lending channel; Monetary policy;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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

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