Is There a Bank Lending Channel of Monetary Policy in Spain?

55 Pages Posted: 23 Dec 2002

Date Written: December 2001

Abstract

This paper uses panel data on banks, for the period 1991-98, to test the existence of a bank-lending channel in the Spanish economy. In order to distinguish between loan demand and supply movements, several exercises are performed. First, we analyse the differential responses, to monetary policy changes, of bank lending by banks with different size, liquidity and capitalisation. Second, we analyse the response to an exogenous deposit-reducing shock (a tax-induced shift from deposits to mutual fund shares). As this involves a pure loan supply shock, it best solves the above-mentioned identification problem. Our results are mostly against the existence of a bank-lending channel in the period under analysis. This result appears to be related to the important role of many small banks as collectors of savings, meaning they have a large volume of resources available for lending.

Keywords: Bank lending, bank funding, monetary transmission mechanism

JEL Classification: C23, E44, E52, G21

Suggested Citation

Hernando, Ignacio and Martínez Pagés, Jorge, Is There a Bank Lending Channel of Monetary Policy in Spain? (December 2001). ECB Working Paper No. 99. Available at SSRN: https://ssrn.com/abstract=356620

Ignacio Hernando (Contact Author)

Banco de España ( email )

Madrid 28014
Spain
+34 91 338 5186 (Phone)
+34 91 338 5678 (Fax)

Jorge Martínez Pagés

Banco de España ( email )

Madrid 28014
Spain

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