Loan Commitments and Monetary Policy

33 Pages Posted: 23 Mar 2007 Last revised: 7 Feb 2021

See all articles by George Sofianos

George Sofianos

affiliation not provided to SSRN

Arie Melnik

University of Haifa - Department of Economics

Paul Wachtel

New York University - Stern School of Business

Date Written: May 1987

Abstract

The impact of loan commitment agreements on the way in which changes in monetary policy affects the economy is examined. In particular, the empirical relevance of quantity credit rationing in the transmission of monetary policy is studied with VAR models. We find evidence of a differential impact of monetary policy on loans under commitment and not under commitment. Our conclusion is that credit rationing for bank loans does occur, although loan commitments effectively protect borrowers from credit rationing. Thus, loan commitments which insulate borrowers from the effects of quantity rationing force monetary policy to work exclusively through interest rate channels.

Suggested Citation

Sofianos, George and Melnik, Arie L. and Wachtel, Paul, Loan Commitments and Monetary Policy (May 1987). NBER Working Paper No. w2232, Available at SSRN: https://ssrn.com/abstract=975940

George Sofianos (Contact Author)

affiliation not provided to SSRN

Arie L. Melnik

University of Haifa - Department of Economics ( email )

Haifa 31905
Israel

Paul Wachtel

New York University - Stern School of Business ( email )

44 West 4th St.
New York, NY 10012
United States
212-998-4030 (Phone)
212-995-4218 (Fax)

HOME PAGE: http://www.stern.nyu.edu/~pwachtel

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