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From Bank Lending Standards to Bank Credit Conditions: An SVAR Approach

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Abstract

This paper uses a structural vector autoregressive (SVAR) model—identified with an external monetary policy instrument and sign restrictions—to derive a measure of bank credit conditions from changes in bank lending standards. The model incorporates data on interest rates, bank credit, and survey-based measures of bank lending standards to identify monetary policy, credit demand, and credit supply shocks. Using these identified shocks, we construct a novel measure of bank credit conditions that corresponds to the component of credit growth that would occur if credit demand remained unchanged, reflecting solely the impacts of monetary policy and credit supply shocks. Using this measure, we find that credit supply–driven changes in bank credit conditions have a stronger impact on real outcomes in the euro area, whereas monetary policy–driven changes play a larger role in the U.S. economy.

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  • Vihar Dalal & Daniel A. Dias & Pinar Uysal, 2025. "From Bank Lending Standards to Bank Credit Conditions: An SVAR Approach," Finance and Economics Discussion Series 2025-055, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2025-55
    DOI: 10.17016/FEDS.2025.055
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    1. Altavilla, Carlo & Brugnolini, Luca & Gürkaynak, Refet S. & Motto, Roberto & Ragusa, Giuseppe, 2019. "Measuring euro area monetary policy," Journal of Monetary Economics, Elsevier, vol. 108(C), pages 162-179.
    2. Elena Afanasyeva & Jochen Güntner, 2014. "Lending Standards, Credit Booms and Monetary Policy," Economics working papers 2014-11, Department of Economics, Johannes Kepler University Linz, Austria.
    3. William F. Bassett & Marcelo Rezende, 2015. "Relation Between Levels and Changes in Lending Standards Reported by Banks in the Senior Loan Officer Opinion Survey on Bank Lending Practices," FEDS Notes 2015-01-16, Board of Governors of the Federal Reserve System (U.S.).
    4. Altavilla, Carlo & Canova, Fabio & Ciccarelli, Matteo, 2020. "Mending the broken link: Heterogeneous bank lending rates and monetary policy pass-through," Journal of Monetary Economics, Elsevier, vol. 110(C), pages 81-98.
    5. Bassett, William F. & Chosak, Mary Beth & Driscoll, John C. & Zakrajšek, Egon, 2014. "Changes in bank lending standards and the macroeconomy," Journal of Monetary Economics, Elsevier, vol. 62(C), pages 23-40.
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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