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In Quest of the Bank Lending Channel: Evidence for Switzerland using Individual Bank Data

  • Robert Bichsel
  • Josef Perrez
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    We study the role of bank capital and liquidity in the transmission of monetary policy in Switzerland. Using a large set of data, we test the assumptions that the effect of a change in the monetary policy stance on a bank's lending activity depends (i) on its capital (the bank capital channel) and (ii) on its liquidity base (the "traditional" bank lending channel). Our findings are consistent with the first hypothesis: lending by banks with a relatively weak capital base reacts more to a change in the monetary policy stance than lending by better capitalised banks. Liquidity, on the other hand, does not appear to play a role in this context. This result constitutes evidence for the existence of a bank lending channel in Switzerland.

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    Article provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.

    Volume (Year): 141 (2005)
    Issue (Month): II (June)
    Pages: 165-190

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    Handle: RePEc:ses:arsjes:2005-ii-1
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    1. 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.
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    7. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier.
    8. Diana Hancock and James A. Wilcox., 1998. "The "Credit Crunch" and the Availability of Credit to Small Business," Research Program in Finance Working Papers RPF-282, University of California at Berkeley.
    9. Joe Peek & Eric Rosengren, 1991. "The capital crunch: neither a borrower nor a lender be," Working Papers 91-4, Federal Reserve Bank of Boston.
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    12. Gambacorta, Leonardo & Mistrulli, Paolo Emilio, 2004. "Does bank capital affect lending behavior?," Journal of Financial Intermediation, Elsevier, vol. 13(4), pages 436-457, October.
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    15. Anil K. Kashyap & Jeremy C. Stein & David W. Wilcox, 1991. "Monetary policy and credit conditions: evidence from the composition of external finance," Finance and Economics Discussion Series 154, Board of Governors of the Federal Reserve System (U.S.).
    16. Skander Van den Heuvel, 2006. "The Bank Capital Channel of Monetary Policy," 2006 Meeting Papers 512, Society for Economic Dynamics.
    17. Kishan, Ruby P & Opiela, Timothy P, 2000. "Bank Size, Bank Capital, and the Bank Lending Channel," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(1), pages 121-41, February.
    18. Angeloni, Ignazio & Ehrmann, Michael, 2003. "Monetary policy transmission in the euro area: any changes after EMU?," Working Paper Series 0240, European Central Bank.
    19. Skander J. Van den Heuvel, 2002. "Does bank capital matter for monetary transmission?," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 259-265.
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