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American Economic Review: Vol. 102 No. 5 (August 2012)

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Credit Supply and Monetary Policy: Identifying the Bank Balance-Sheet Channel with Loan Applications

Article Citation

Jiménez, Gabriel, Steven Ongena, José-Luis Peydró, and Jesús Saurina. 2012. "Credit Supply and Monetary Policy: Identifying the Bank Balance-Sheet Channel with Loan Applications." American Economic Review, 102(5): 2301-26.

DOI: 10.1257/aer.102.5.2301

Abstract

We analyze the impact of monetary policy on the supply of bank credit. Monetary policy affects both loan supply and demand, thus making identification a steep challenge. We therefore analyze a novel, supervisory dataset with loan applications from Spain. Accounting for time-varying firm heterogeneity in loan demand, we find that tighter monetary and worse economic conditions substantially reduce loan granting, especially from banks with lower capital or liquidity ratios; responding to applications for the same loan, weak banks are less likely to grant the loan. Finally, firms cannot offset the resultant credit restriction by applying to other banks. (JEL E32, E44, E52, G21, G32)

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Authors

Jiménez, Gabriel (Bank of Spain)
Ongena, Steven (Tilburg U)
Peydró, José-Luis (U Pompeu Fabra and Barcelona GSE)
Saurina, Jesús (Bank of Spain)

JEL Classifications

E32: Business Fluctuations; Cycles
E44: Financial Markets and the Macroeconomy
E52: Monetary Policy
G21: Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
G32: Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms


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