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Monetary policy and bank lending to small firms

  • Kandrac, John
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    This paper presents an empirical test of the balance sheet channel of monetary policy. I take advantage of a panel data set containing nearly all domestic banks to search for an adjustment in lending patterns induced by changes in the stance of monetary policy. I find that in response to monetary policy tightening, banks decrease the proportion of credit extended to high-agency-cost “small” borrowers. Additionally, I provide evidence that this result is in fact driven by a balance sheet effect working on small borrowers rather than on small lenders.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0164070412000638
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    Article provided by Elsevier in its journal Journal of Macroeconomics.

    Volume (Year): 34 (2012)
    Issue (Month): 3 ()
    Pages: 741-748

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    Handle: RePEc:eee:jmacro:v:34:y:2012:i:3:p:741-748
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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