Bank Lending Channel Effectiveness and Loan Sales in the US

Jonas, M. and S. King. "Bank Lending Channel Effectiveness and Loan Sales in the US," British Journal of Economics, Management & Trade, ISSN: 2278 – 098X,Vol.: 4, Issue.: 1 (January 2014)

19 Pages Posted: 15 Jul 2014

See all articles by Michael R. Jonas

Michael R. Jonas

University of San Francisco - Department of Economics

Sharmila King

University of the Pacific (UOP) - Department of Economics

Date Written: October 4, 2013

Abstract

This paper examines whether banks that sell loans in the secondary market respond differently to a monetary policy innovation from those that do not engage in loan sales. We answer this question by measuring the policy response while controlling for loan sales activities. Using a simple theoretical model and U.S. bank-level Call Report longitudinal data for the period 1991Q1-2008 Q4, we conduct a dynamic panel regression analysis. We find that the long-run response to a typical policy shock is three times greater for mid-size banks engaging in loan sales. Given the increase in proportion of banks engaging in loan sales, this finding has strong implications for policy makers and bank industry volatility.

Keywords: Securitization; loan sales; monetary policy; bank lending channel; dynamic panel regression

Suggested Citation

Jonas, Michael R. and King, Sharmila, Bank Lending Channel Effectiveness and Loan Sales in the US (October 4, 2013). Jonas, M. and S. King. "Bank Lending Channel Effectiveness and Loan Sales in the US," British Journal of Economics, Management & Trade, ISSN: 2278 – 098X,Vol.: 4, Issue.: 1 (January 2014), Available at SSRN: https://ssrn.com/abstract=2466229

Michael R. Jonas (Contact Author)

University of San Francisco - Department of Economics ( email )

2130 Fulton Street
San Francisco, CA 94117-1080
United States

Sharmila King

University of the Pacific (UOP) - Department of Economics ( email )

Stockton, CA 95211
United States

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