Working Paper: CEPR ID: DP4724
Authors: Wouter Den Haan; Steven Sumner; Guy Yamashiro
Abstract: A robust finding for both small and large banks is that in response to a monetary tightening, real estate and consumer loans decrease while C&I loans increase. We also show that in a standard log-linear VAR the impulse response function of an aggregate variable is time varying. The finding that loan components move in opposite directions and the property that the impulse response of total loans is time-varying explain why studies that use total loans have had such a hard time finding a robust response of bank loans to a monetary tightening.
Keywords: Impulse Response Functions; Small and Large Banks; VAR
JEL Codes: E40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Monetary Tightening (E52) | Decrease in Real Estate Loans (G21) |
| Monetary Tightening (E52) | Decrease in Consumer Loans (G21) |
| Monetary Tightening (E52) | Increase in Commercial and Industrial Loans (G21) |
| Monetary Tightening (E52) | Total Loans (Time-Varying Response) (C32) |
| Initial Values of Micro Components (Y20) | Aggregate Response of Total Loans (G21) |
| Size of Banks (G21) | Response of Total Loans (G21) |
| Increased Importance of Real Estate Loans (G21) | More Negative Response of Total Loans for Small Banks (G21) |