Premium
The Bank Lending Channel: A FAVAR Analysis
Author(s) -
DAVE CHETAN,
DRESSLER SCOTT J.,
ZHANG LEI
Publication year - 2013
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12067
Subject(s) - vector autoregression , shock (circulatory) , aggregate (composite) , identification (biology) , economics , channel (broadcasting) , monetary economics , monetary policy , macro , structural vector autoregression , econometrics , computer science , biology , medicine , materials science , botany , composite material , programming language , computer network
We examine the bank lending channel (BLC) of monetary transmission in a factor‐augmented vector autoregression (FAVAR). A FAVAR exploits large numbers of macro‐economic indicators and allows us to consider an alternative identification of monetary shocks and analyze the lending response of banks at the aggregate and individual levels. We find that the existence of the BLC is more prevalent than previously thought using aggregated lending data, while the lending response of individual banks are driven more by specific innovations than monetary shocks. Nonetheless, the average individual bank response to a monetary shock is consistent with the existence of a BLC.