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Changes in Financial Structure and Asset Price Substitutability: A Test of the Bank Lending Channel

  • Sophocles N. Brissimis


    (Bank of Greece, Economic Research Department and University of Piraeus)

  • Nicholas S. Magginas

    (Athens University of Economics and Business and National Bank of Greece)

In this paper we develop a method for testing the implications of the Bernanke-Blinder model for monetary policy transmission. Multivariate cointegration techniques are used in a sample that includes six major industrial countries with data covering the last 25 years. Moreover, we examine whether changes in financial markets affected the degree of asset substitutability and thus the potency of the lending channel. We find that in the US and the UK, representing the “Anglo-Saxon type” of financial market structure, the lending channel is inoperative, while in Japan it is still important for monetary transmission. The other three European countries examined – Germany, France, Italy – are in between, with the lending channel losing its potency in the last decade.

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Paper provided by Bank of Greece in its series Working Papers with number 05.

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Length: 36 pages
Date of creation: Sep 2003
Date of revision:
Publication status: Published in Economic Modelling, 2005, 22 (5), pp. 879-904
Handle: RePEc:bog:wpaper:05
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