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Heterogeneous Bank Lending Responses to Monetary Policy: New Evidence from a Real-time Identification

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  • Mr. John C Bluedorn
  • Mr. Christopher Bowdler
  • Mr. Christoffer Koch

Abstract

We present new evidence on how heterogeneity in banks interacts with monetary policy changes to impact bank lending. Using an exogenous policy measure identified from narratives on FOMC intentions and real-time economic forecasts, we find much greater heterogeneity in U.S. bank lending responses than that found in previous research based on realized federal funds rate changes. Our findings suggest that studies using realized monetary policy changes confound the monetary policy’s effects with those of changes in expected macrofundamentals. We also extend Romer and Romer (2004)’s identification scheme, and expand the time and balance sheet coverage of the U.S. banking sample.

Suggested Citation

  • Mr. John C Bluedorn & Mr. Christopher Bowdler & Mr. Christoffer Koch, 2013. "Heterogeneous Bank Lending Responses to Monetary Policy: New Evidence from a Real-time Identification," IMF Working Papers 2013/118, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2013/118
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    Cited by:

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    2. Boeckx, Jef & de Sola Perea, Maite & Peersman, Gert, 2020. "The transmission mechanism of credit support policies in the euro area," European Economic Review, Elsevier, vol. 124(C).
    3. Fungáécová, Zuzana & Kerola, Eeva & Laine, Olli-Matti, 2023. "Monetary policy transmission below zero," Bank of Finland Research Discussion Papers 11/2023, Bank of Finland.
    4. Salmanov, Oleg & Zayernyuk, Victor & Lopatina, Olga, 1915. "An Analysis of the Impact of Monetary Policy on Bank Lending in Russia," MPRA Paper 112263, University Library of Munich, Germany.
    5. Pavel S. Kapinos, 2021. "Monetary policy news and systemic risk at the zero lower bound," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 4932-4945, October.
    6. Ramos-Tallada, Julio, 2015. "Bank risks, monetary shocks and the credit channel in Brazil: Identification and evidence from panel data," Journal of International Money and Finance, Elsevier, vol. 55(C), pages 135-161.
    7. Isabel Gödl-Hanisch, 2023. "Bank Concentration and Monetary Policy Pass-Through," CESifo Working Paper Series 10378, CESifo.
    8. Igan, Deniz & Kabundi, Alain & De Simone, Francisco Nadal & Tamirisa, Natalia, 2017. "Monetary policy and balance sheets," Journal of Policy Modeling, Elsevier, vol. 39(1), pages 169-184.
    9. Carolina Ortega Londono, 2018. "Transmission of Monetary Policy and Bank Heterogeneity in Colombia," Documentos de Trabajo de Valor Público 16792, Universidad EAFIT.
    10. Carolina Ortega Londono & Diego Restrepo, 2018. "Transmission of Monetary Policy and Bank Heterogeneity in Colombia," Documentos de Trabajo de Valor Público 16987, Universidad EAFIT.
    11. Bordo, Michael D. & Duca, John V. & Koch, Christoffer, 2016. "Economic policy uncertainty and the credit channel: Aggregate and bank level U.S. evidence over several decades," Journal of Financial Stability, Elsevier, vol. 26(C), pages 90-106.
    12. Koch, Christoffer, 2015. "Deposit interest rate ceilings as credit supply shifters: Bank level evidence on the effects of Regulation Q," Journal of Banking & Finance, Elsevier, vol. 61(C), pages 316-326.

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    More about this item

    Keywords

    WP; lending response; bank holding company; lending channel; lending growth; responses to monetary policy; Monetary Transmission; Monetary Policy Identification; Banking; growth regression; monetary policy policy change; market driver; exogenous monetary policy contraction; lending reduction; bank characteristic; equity capital; lending behavior; Bank credit; Loans; Financial statements; Monetary aggregates; Inflation;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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