The Credit Concentration Channel of Monetary Policy Transmission During a Crisis
64 Pages Posted: 12 Dec 2015 Last revised: 5 Sep 2019
Date Written: September 5, 2019
I use loan-level data on mortgage applications and the monetary easing of 2008 in the United States to identify the effect of credit concentration on the subsequent recovery of lending. In response to monetary easing, lenders expanded their credit supply but less so in more concentrated counties. Within counties, the pass-through was lower for lenders with higher local market power. The credit concentration channel is symmetrically active during the 2005 monetary tightening episode. It is distinct from the deposits channel of monetary policy transmission, and its influence is ubiquitous: it affects both new loans and refinances, operates through both depository and non-depository institutions, and impacts lender supply across the spectrum of market positions.
Keywords: mortgage credit, lending channel, monetary policy, market concentration, market power
JEL Classification: G01, G21, G23, E51, E52, E58
Suggested Citation: Suggested Citation