Working Paper: NBER ID: w4821
Authors: Anil K Kashyap; Jeremy C Stein
Abstract: This paper uses disaggregated data on bank balance sheets to provide a test of the lending view of monetary policy transmission. We argue that if the lending view is correct, one should expect the loan and security portfolios of large and small banks to respond differentially to a contraction in monetary policy. We first develop this point with a theoretical model; we then test to see if the model's predictions are borne out in the data.
Keywords: Monetary Policy; Bank Balance Sheets; Lending View; Capital Market Imperfections
JEL Codes: E4; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Contraction in monetary policy (E52) | Differential responses in bank lending behavior (G21) |
| Contraction in monetary policy (E52) | Decrease in lending for smaller banks (G21) |
| Capital market imperfections (G19) | Decrease in lending for smaller banks (G21) |
| Contraction in monetary policy (E52) | Smaller banks experience a more significant reduction in loan supply (G21) |