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Taking Stock - Credit Measures in Monetary Transmission

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  • Stefan Behrendt

    (School of Economics and Business Administration, Friedrich Schiller University Jena)

Abstract

Empirical research on the monetary transmission mechanism considering credit developments is almost exclusively limited to the amount of outstanding credit in an economy. Two issues arise out of this. First, stock-flow inconsistencies might occur. Second, the change of the outstanding amount of credit on banks' balance sheets does not consist only of new lending activity, but also incorporates other factors. As central banks should predominantly be focused on the amount of newly created credits in an economy while analysing the impact of monetary policy towards lending activity, using the change in the stock of lending can lead to distorted results, because of the incorporation of data on maturing loans, revaluations, securitization, and write-offs into this variable. The majority of existing credit channel literature does not really account for these issues. This paper makes a case to better caption new lending activity in monetary policy research. What is shown in this paper is that empirical investigations might lead to differing results when accounting for the other factors in the stock data. Central bank policy might therefore be biased.

Suggested Citation

  • Stefan Behrendt, 2016. "Taking Stock - Credit Measures in Monetary Transmission," Jena Economics Research Papers 2016-002, Friedrich-Schiller-University Jena.
    • Handle: RePEc:jrp:jrpwrp:2016-002
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    File URL: https://oweb.b67.uni-jena.de/Papers/jerp2016/wp_2016_002.pdf
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    Cited by:

    1. Lucas Avezum, 2021. "Assessment of the effectiveness of the macroprudential measures implemented in the context of the Covid-19 pandemic," Working Papers w202107, Banco de Portugal, Economics and Research Department.
    2. Stefan Behrendt, 2017. "Unconventional Monetary Policy Effects on Bank Lending in the Euro Area," Jena Economics Research Papers 2017-002, Friedrich-Schiller-University Jena.
    3. Stefan Behrendt, 2017. "Low Long-Term Interest Rates - An alternative View," Jena Economics Research Papers 2017-001, Friedrich-Schiller-University Jena.
    4. Stefan Behrendt, 2016. "Determinants of lending activity in the Euro area," Jena Economics Research Papers 2016-017, Friedrich-Schiller-University Jena.

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    More about this item

    Keywords

    credit channel; monetary transmission; bank lending;
    All these keywords.

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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