Trusting the Bankers: A New Look at the Credit Channel of Monetary Policy

39 Pages Posted: 27 Feb 2011 Last revised: 30 Aug 2013

See all articles by Angela Maddaloni

Angela Maddaloni

European Central Bank (ECB)

Matteo Ciccarelli

European Central Bank (ECB)

Jose-Luis Peydro

Catalan Institution of Research and Advanced Studies (ICREA); Universitat Pompeu Fabra - Faculty of Economic and Business Sciences; Barcelona Graduate School of Economics (Barcelona GSE); Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2013

Abstract

Credit supply and demand changes are mostly unobserved, thus identifying completely the transmission of monetary policy through the credit channel is unfeasible. Bank lending surveys by central banks, however, contain reliable quarterly information on changes in loan conditions due to bank, firm and household balance sheet strength and on changes in loan demand. Using the U.S. and the unique Euro area surveys, we find that the credit channel amplifies a monetary policy shock on GDP and prices, through the balance-sheets of households, firms and banks. For corporate loans, amplification is highest through the bank lending and the borrower's balance sheet channel; for households, demand is the strongest channel.

Keywords: Credit channel, Firm and household balance-sheet channels, Bank lending channel, Credit crunch, Credit supply, Monetary policy.

JEL Classification: E32, E44, E5, G01, G21

Suggested Citation

Maddaloni, Angela and Ciccarelli, Matteo and Peydro, Jose-Luis, Trusting the Bankers: A New Look at the Credit Channel of Monetary Policy (July 2013). Available at SSRN: https://ssrn.com/abstract=1767969 or http://dx.doi.org/10.2139/ssrn.1767969

Angela Maddaloni (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Matteo Ciccarelli

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Jose-Luis Peydro

Catalan Institution of Research and Advanced Studies (ICREA) ( email )

P/ Lluis Companys 23
Barcelona, 08010
Spain

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, Barcelona 08005
Spain
(+34) 93 542 1756 (Phone)
(+34) 93 542 1746 (Fax)

HOME PAGE: http://https://sites.google.com/site/joseluispeydroswebpage/

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

HOME PAGE: http://www.barcelonagse.eu/Faculty.php?id=432

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI) ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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