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Causal ordering and ‘The bank lending channel’
Author(s) -
Perez Stephen J.
Publication year - 1998
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/(sici)1099-1255(199811/12)13:6<613::aid-jae492>3.0.co;2-7
Subject(s) - causality (physics) , channel (broadcasting) , economics , order (exchange) , monetary transmission mechanism , transmission channel , monetary economics , central bank , monetary policy , credit channel , transmission (telecommunications) , finance , inflation targeting , computer science , telecommunications , physics , quantum mechanics
The bank lending channel implies the Federal Reserve can influence real income by controlling the level of intermediated loans. Using the notion of causality developed by Simon (1953) and the causal order methodology developed by Hoover (1990), I test for an operative bank lending channel in the transmission mechanism of monetary policy. I find loans did cause real income; there is evidence that a bank lending channel did exist in the 1960s. The data appears to show, however, that by the early 1990s the bank lending channel was no longer operative. © 1998 John Wiley & Sons, Ltd.