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Bank Lending and Monetary Policy Transmission: A VECM Analysis for Germany

  • Oliver Hülsewig


    (Universität Wuerzburg)

  • Peter Winker


    (Universität Erfurt)

  • Andreas Worms


    (Deutsche Bundesbank)

This paper explores the existence of the credit channel in the transmission of monetary policy in Germany on the basis of a structural analysis of aggregate bank loan data. The empirical analysis is carried out in a vector error correction model (VECM), which allows to identify long-run co-integration relationships that can be interpreted as loan supply and loan demand equations. In this way, the fundamental identification problem inherent in reduced form approaches based on aggregate data is explicitly adressed. The short-run dynamics of the VECM is investigated by means of impulse response analysis, which sets out the impact of a monetary policy shock on the variables in the system. Empirical evidence consistent with the existence of a credit channel operating in Germany alongside the interest rate channel can be reported.

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Article provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.

Volume (Year): 224 (2004)
Issue (Month): 5 (September)
Pages: 511-529

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Handle: RePEc:jns:jbstat:v:224:y:2004:i:5:p:511-529
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