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How responsive are banks to monetary policy?

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  • David Vera

Abstract

I provide evidence that the response of commercial banks’ loans to monetary policy shocks in the US has changed. In particular, using bank data from the period 1959 to 2007, I show that the effect of monetary policy shocks on banks’ credit has significantly decreased over time. My results contrast significantly with previous finding in the literature (Bernanke and Blinder, 1992). As potential explanations to the lower effect of monetary shocks, I describe some of the changes in bank regulation that triggered bank consolidation and changes in the bank-size distribution, as well as changes in the banks’ portfolio towards an increasing share of real estate loans.

Suggested Citation

  • David Vera, 2012. "How responsive are banks to monetary policy?," Applied Economics, Taylor & Francis Journals, vol. 44(18), pages 2335-2346, June.
    • Handle: RePEc:taf:applec:44:y:2012:i:18:p:2335-2346
    DOI: 10.1080/00036846.2011.564143
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    References listed on IDEAS

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    Cited by:

    1. Yu Hsing, 2014. "Monetary Policy Transmission and Bank Lending In South Korea and Policy Implications," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(11), pages 1674-1680, November.
    2. Yu Hsing, 2013. "Test of the Bank Lending Channel: The Case of Australia," Economics Bulletin, AccessEcon, vol. 33(4), pages 2575-2582.
    3. Yu Hsing, 2014. "Test of the bank lending channel: the case of US consumer loans," Applied Economics Letters, Taylor & Francis Journals, vol. 21(7), pages 466-469, May.
    4. Yu HSING, 2014. "Test of the bank lending channel: The case of Hungary," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(590)), pages 115-120, January.
    5. Juan S. Holguín & Jorge M. Uribe, 2020. "The credit supply channel of monetary policy: evidence from a FAVAR model with sign restrictions," Empirical Economics, Springer, vol. 59(5), pages 2443-2472, November.

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