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What Do a Million Banks Have to Say About the Transmission of Monetary Policy?

68 Pages Posted: 10 Jun 2000 Last revised: 5 Oct 2010

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)

Date Written: June 1997

Abstract

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

Suggested Citation

Kashyap, Anil K. and Stein, Jeremy C., What Do a Million Banks Have to Say About the Transmission of Monetary Policy? (June 1997). NBER Working Paper No. w6056. Available at SSRN: https://ssrn.com/abstract=226466

Anil K. Kashyap (Contact Author)

University of Chicago, Booth School of Business ( email )

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National Bureau of Economic Research (NBER) ( email )

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Federal Reserve Bank of Chicago ( email )

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Jeremy C. Stein

Harvard University - Department of Economics ( email )

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HOME PAGE: http://post.economics.harvard.edu/faculty/stein/stein.html

National Bureau of Economic Research (NBER)

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