How Important is the Credit Channel in the Transmission of Monetary Policy? / Valerie A. Ramey.

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Ramey, Valerie A

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w4285.Publication details: Cambridge, Mass. National Bureau of Economic Research 1993.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: This paper empirically tests the importance of the credit channel in the transmission of monetary policy. Three credit variables are analyzed: total bank loans, bank holdings of securities relative to loans, and the difference in the growth rate of short-term debt of small and large firms. In order to determine the marginal effect of the credit channel over the standard money channel, the significance of the credit variables is studied in a model that includes money (M2). In most cases, the credit variables play an insignificant role in the impact of monetary policy shocks on output.

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March 1993.

This paper empirically tests the importance of the credit channel in the transmission of monetary policy. Three credit variables are analyzed: total bank loans, bank holdings of securities relative to loans, and the difference in the growth rate of short-term debt of small and large firms. In order to determine the marginal effect of the credit channel over the standard money channel, the significance of the credit variables is studied in a model that includes money (M2). In most cases, the credit variables play an insignificant role in the impact of monetary policy shocks on output.