What Do a Million Banks Have to Say About the Transmission of Monetary Policy?
Anil K. Kashyap
University of Chicago, Booth School of Business; National Bureau of Economic Research (NBER); Federal Reserve Bank of Chicago
Jeremy C. Stein
Harvard University - Department of Economics; National Bureau of Economic Research (NBER)
NBER Working Paper No. w6056
In an effort to shed new light on the monetary transmission mechanism, we create a panel data set that includes quarterly observations of every insured commercial bank in the United States over the period 1976-1993. Our key cross-sectional finding is that the impact of monetary policy on lending behavior is significantly more pronounced for banks with less liquid balance sheets -- i.e., banks with lower ratios of cash and securities to assets. Moreover, this result is entirely attributable to the smaller banks in our sample, those in the bottom 95% of the size distribution. Among other things, our findings provide strong support for the existence of a lending channel
Number of Pages in PDF File: 68
Date posted: June 10, 2000
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