The Bank Lending Channel: A FAVAR Analysis (original) (raw)

Abstract

We examine the role of commercial banks in monetary transmission in a factoraugmented vector autoregression (FAVAR). A FAVAR exploits a large number of macroeconomic indicators to identify monetary policy shocks, and we add commonly used lending aggregates and lending data at the bank level. While our results suggest that the bank lending channel (BLC) is stronger than previously thought, this feature is not robust. In addition, our results indicate a di¤use response to monetary innovations when individual banks are grouped according to asset sizes and loan components.

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