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Monetary policy effects on bank loans in Germany: A panel-econometric analysis

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  • Worms, Andreas

Abstract

A crucial condition for the existence of a credit channel through bank loans is that monetary policy should be able to change bank loan supply. This paper contributes to the discussion on this issue by presenting empirical evidence from dynamic panel estimations based on a dataset that comprises individual balance-sheet information on all German banks. It shows that the average bank reduces its lending more sharply in reaction to a restrictive monetary policy measure, the lower its ratio of short-term interbank deposits to total assets is. This result is robust against a broad variety of changes in the specification. A dependence on its size can be found only if explicitly controlled for this dominating effect and/or if the very small banks are excluded. Overall, the evidence is compatible with the existence of a credit channel, although it is weakened by the banks´ liquidity management.

Suggested Citation

  • Worms, Andreas, 2001. "Monetary policy effects on bank loans in Germany: A panel-econometric analysis," Discussion Paper Series 1: Economic Studies 2001,17, Deutsche Bundesbank.
  • Handle: RePEc:zbw:bubdp1:4162
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    File URL: https://www.econstor.eu/bitstream/10419/19554/1/200117dkp.pdf
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    Cited by:

    1. Hülsewig Oliver & Winker Peter & Worms Andreas, 2004. "Bank Lending and Monetary Policy Transmission: A VECM Analysis for Germany / Bankkredite und geldpolitische Transmission: Eine VECM Analyse für Deutschland," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 224(5), pages 511-529, October.
    2. Andreas Worms, 2003. "Interbank Relationships and the Credit Channel in Germany," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 30(2), pages 179-198, June.
    3. Ewa Wrobel & Malgorzata Pawlowska, 2002. "Monetary transmission in Poland: some evidence on interest rate and credit channels," NBP Working Papers 24, Narodowy Bank Polski, Economic Research Department.

    More about this item

    Keywords

    monetary policy transmission; credit channel; dynamic panel data;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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