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New evidence on the lending channel

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  • Adam B. Ashcraft

Abstract

Do banks play a special role in the transmission mechanism of monetary policy? I use the presence of internal capital markets in bank holding companies to isolate plausibly exogenous variation in the financial constraints faced by subsidiary banks. In particular, I demonstrate that affiliated bank loan growth is less sensitive to changes in the federal funds rate than that of unaffiliated banks, and that these relatively unconstrained banks are better able to smooth insured deposit outflows by issuing uninsured debt. State loan growth also becomes less sensitive to changes in the federal funds rate as loan market share of affiliated banks increases, but state output growth is largely unaffected.

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  • Adam B. Ashcraft, 2001. "New evidence on the lending channel," Staff Reports 136, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:136
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    References listed on IDEAS

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    6. Caballero, Ricardo J., 1999. "Aggregate investment," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 12, pages 813-862, Elsevier.
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    Keywords

    Capital market; Monetary policy; Bank loans;
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