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Listening to loan officers: the impact of commercial credit standards on lending and output

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  • Cara S. Lown
  • Donald P. Morgan
  • Sonali Rohatgi

Abstract

Over most of the last thirty-three years, the Federal Reserve has polled a small number of bank loan officers about their moves to tighten or ease commercial credit standards. Although the Senior Loan Officer Opinion Survey uses a small sample and gathers only qualitative information, it proves to be a useful tool in predicting changes in commercial lending and output. The authors find a strong correlation between tighter credit standards and slower loan growth and output, even after controlling for credit demand and other predictors of lending and output. The analysis also shows that the loan officer reports can help predict narrower measures of business activity, including inventory investment and industrial production.

Suggested Citation

  • Cara S. Lown & Donald P. Morgan & Sonali Rohatgi, 2000. "Listening to loan officers: the impact of commercial credit standards on lending and output," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 1-16.
  • Handle: RePEc:fip:fednep:y:2000:i:jul:p:1-16:n:v.6no.2
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    References listed on IDEAS

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    2. Stacey L. Schreft & Raymond E. Owens, 1991. "Survey evidence of tighter credit conditions: what does it mean?," Economic Review, Federal Reserve Bank of Richmond, issue Mar, pages 29-34.
    3. Kashyap, Anil K & Stein, Jeremy C & Wilcox, David W, 1993. "Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance," American Economic Review, American Economic Association, vol. 83(1), pages 78-98, March.
    4. Jason Bram & Sydney Ludvigson, 1998. "Does consumer confidence forecast household expenditure? a sentiment index horse race," Economic Policy Review, Federal Reserve Bank of New York, issue Jun, pages 59-78.
    5. John V. Duca, 1995. "Credit availability, bank consumer lending, and consumer durables," Working Papers 9514, Federal Reserve Bank of Dallas.
    6. Bernanke, Ben S & Blinder, Alan S, 1992. "The Federal Funds Rate and the Channels of Monetary Transmission," American Economic Review, American Economic Association, vol. 82(4), pages 901-921, September.
    7. Anil K Kashyap & Owen A. Lamont & Jeremy C. Stein, 1994. "Credit Conditions and the Cyclical Behavior of Inventories," The Quarterly Journal of Economics, Oxford University Press, vol. 109(3), pages 565-592.
    8. Alan S. Blinder & Louis J. Maccini, 1991. "Taking Stock: A Critical Assessment of Recent Research on Inventories," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 73-96, Winter.
    9. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 27-48, Fall.
    10. Jonathan McCarthy, 1997. "Debt, delinquencies, and consumer spending," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 3(Feb).
    11. Ben S. Bernanke & Cara S. Lown, 1991. "The Credit Crunch," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 205-248.
    12. Friedman, Benjamin M & Kuttner, Kenneth N, 1992. "Money, Income, Prices, and Interest Rates," American Economic Review, American Economic Association, vol. 82(3), pages 472-492, June.
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    Keywords

    Bank loans ; Business cycles ; Forecasting;

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