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Changes in bank lending standards and the macroeconomy

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  • Bassett, William F.
  • Chosak, Mary Beth
  • Driscoll, John C.
  • Zakrajšek, Egon

Abstract

Identifying macroeconomic effects of credit shocks is difficult because many of the same factors that influence the supply of loans also affect the demand for credit. Using bank-level responses to the Federal Reserve's Loan Officer Opinion Survey, we construct a new credit supply indicator: changes in lending standards, adjusted for the macroeconomic and bank-specific factors that also affect loan demand. Tightening shocks to this credit supply indicator lead to a substantial decline in output and the capacity of businesses and households to borrow from banks, as well as to a widening of credit spreads and an easing of monetary policy.

Suggested Citation

  • Bassett, William F. & Chosak, Mary Beth & Driscoll, John C. & Zakrajšek, Egon, 2014. "Changes in bank lending standards and the macroeconomy," Journal of Monetary Economics, Elsevier, vol. 62(C), pages 23-40.
  • Handle: RePEc:eee:moneco:v:62:y:2014:i:c:p:23-40
    DOI: 10.1016/j.jmoneco.2013.12.005
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