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Credit supply and monetary policy: identifying the bank balance-sheet channel with loan applications


Jiménez, Gabriel; Peydró, José-Luis; Saurina, Jesús; Ongena, Steven (2012). Credit supply and monetary policy: identifying the bank balance-sheet channel with loan applications. American Economic Review, 102(5):2301-2326.

Abstract

We analyze the impact of monetary policy on the supply of bank credit. Monetary policy affects both loan supply and demand, thus making identification a steep challenge. We therefore analyze a novel, supervisory dataset with loan applications from Spain. Accounting for time-varying firm heterogeneity in loan demand, we find that tighter monetary and worse economic conditions substantially reduce loan granting, especially from banks with lower capital or liquidity ratios; responding to applications for the same loan, weak banks are less likely to grant the loan. Finally, firms cannot offset the resultant credit restriction by applying to other banks. (JEL E32, E44, E52, G21, G32)

Abstract

We analyze the impact of monetary policy on the supply of bank credit. Monetary policy affects both loan supply and demand, thus making identification a steep challenge. We therefore analyze a novel, supervisory dataset with loan applications from Spain. Accounting for time-varying firm heterogeneity in loan demand, we find that tighter monetary and worse economic conditions substantially reduce loan granting, especially from banks with lower capital or liquidity ratios; responding to applications for the same loan, weak banks are less likely to grant the loan. Finally, firms cannot offset the resultant credit restriction by applying to other banks. (JEL E32, E44, E52, G21, G32)

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103 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:7 September 2012
Deposited On:27 Feb 2014 10:10
Last Modified:08 Dec 2017 04:09
Publisher:American Economic Association
ISSN:0002-8282
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.1257/aer.102.5.2301
Official URL:http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.5.2301
Other Identification Number:merlin-id:9205

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