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American Economic Review: Vol. 90 No. 3 (June 2000)

AER Volume. 90, Issue 3 | Previous ArticleNext Article

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What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?

Article Citation

Kashyap, Anil K., and Jeremy C. Stein. 2000. "What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?." American Economic Review, 90(3): 407-428.

DOI: 10.1257/aer.90.3.407

Abstract

We study the monetary-transmission mechanism with a data set that includes quarterly observations of every insured U.S. commercial bank from 1976 to 1993. We find that the impact of monetary policy on lending is stronger for banks with less liquid balance sheets--i.e., banks with lower ratios of securities to assets. Moreover, this pattern is largely attributable to the smaller banks, those in the bottom 95 percent of the size distribution. Our results support the existence of a "bank lending channel" of monetary transmission, though they do not allow us to make precise statements about its quantitative importance.

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Authors

Kashyap, Anil K. (U Chicago, Federal Reserve Bank of Chicago, and NBER)
Stein, Jeremy C. (MIT and NBER)

JEL Classifications

E52: Monetary Policy
E44: Financial Markets and the Macroeconomy
G21: Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages