Bank Lending and the Transmission of Monetary Policy: A Vecm Analysis for Germany
International University in Germany Working Paper No. 08/2001
29 Pages Posted: 1 May 2002
Date Written: December 2001
This paper addresses the relevance of the bank lending channel in the transmission of monetary policy in Germany on the basis of a structural vector error correction model (VECM). In order to deal with the fundamental problem of identification we use restriction tests on cointegration vectors to identify long-run supply and demand relationships in the market for bank loans. We find empirical evidence that is consistent with a bank lending channel in Germany. To our knowledge, this analysis is the first study that looks at the German loan market in the context of monetary transmission by applying such a structural approach to aggregate data.
Keywords: Monetary Transmission, Bank Lending Channel, Vector Error Correction Model
JEL Classification: E44, E52
Suggested Citation: Suggested Citation