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Causal ordering and 'The bank lending channel'

Author

Listed:
  • Stephen J. Perez

    (Washington State University, Department of Economics, Box 644741, Pullman, WA 99164-4741, USA)

Abstract

The bank lending channel implies the Federal Reserve can influence real income by controlling the level of intermediated loans. Using the notion of causality developed by Simon (1953) and the causal order methodology developed by Hoover (1990), I test for an operative bank lending channel in the transmission mechanism of monetary policy. I find loans did cause real income; there is evidence that a bank lending channel did exist in the 1960s. The data appears to show, however, that by the early 1990s the bank lending channel was no longer operative. © 1998 John Wiley & Sons, Ltd.

Suggested Citation

  • Stephen J. Perez, 1998. "Causal ordering and 'The bank lending channel'," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(6), pages 613-626.
    • Handle: RePEc:jae:japmet:v:13:y:1998:i:6:p:613-626
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    Cited by:

    1. Chetan Dave & Scott J. Dressler & Lei Zhang, 2013. "The Bank Lending Channel: A FAVAR Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(8), pages 1705-1720, December.
    2. Bessler, David A. & Leatham, David J. & Yang, Juan, 2005. "In Search of the "Bank Lending Channel": Causality Analysis for the Transmission Mechanism of U.S. Monetary Policy," 2005 Annual meeting, July 24-27, Providence, RI 19558, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Nektarios A. Michail & Demetris Koursaros & Christos S. Savva, 2016. "The Lack of Persistence of Interest Rate Changes on Banks’ Lending and Risk Taking Behaviour," Working Papers 2016-1, Central Bank of Cyprus.
    4. Ryan R. Brady, 2011. "Consumer Credit, Liquidity, And The Transmission Mechanism Of Monetary Policy," Economic Inquiry, Western Economic Association International, vol. 49(1), pages 246-263, January.
    5. Norhana Endut & James Morley & Pao-Lin Tien, 2018. "The changing transmission mechanism of US monetary policy," Empirical Economics, Springer, vol. 54(3), pages 959-987, May.
    6. Nektarios A. Michail & Christos S. Savva & Demetris Koursaros, 2021. "Are central banks to blame? Monetary policy and bank lending behavior," Bulletin of Economic Research, Wiley Blackwell, vol. 73(4), pages 762-779, October.
    7. Nektarios A. Michail & Demetris Koursaros & Christos S. Savva, 2016. "The Lack of Persistence of Interest Rate Changes on Banks’ Lending and Risk Taking Behaviour," Working Papers 2016-01, Central Bank of Cyprus.
    8. Marie Podevin, 2001. "Interaction entre taux d'intérêt allemands et français : un réexamen de l'hypothèse de dominance allemande," Économie et Prévision, Programme National Persée, vol. 148(2), pages 49-70.
    9. Turhan, Ibrahim M. & Gumus, Nihat, 2014. "On the relative importance of monetary transmission channels in Turkey," MPRA Paper 69827, University Library of Munich, Germany, revised 12 May 2014.
    10. Rondorf, Ulrike, 2012. "Are bank loans important for output growth?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(1), pages 103-119.
    11. Jui-Chuan (Della) Chang & Dennis W. Jansen, 2005. "The Effect of Monetary Policy on Bank Lending and Aggregate Output: Asymmetries from Nonlinearities in the Lending Channel," Annals of Economics and Finance, Society for AEF, vol. 6(1), pages 129-153, May.

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