Trusting the Bankers: A New Look at the Credit Channel of Monetary Policy
Speaker
Abstract
| The identification of the credit channel is challenging because the changes in demand and supply of credit are difficult to measure. To solve this problem we use the detailed answers on credit supply and demand from the unique, confidential Euro area Bank Lending Survey and from the U.S. Senior Loan Officer Survey. Embedding this information within an otherwise standard VAR model, we find that: (1) the credit channel of monetary policy is active through the balance-sheets of households, firms and banks; (2) the impact of a monetary policy shock on GDP is higher through credit supply than demand; (3) the bank lending is stronger than the balance-sheet channel for firms, whereas the latter is stronger for households; (4) a credit crunch (for firms in the Euro area and for households in the US) has contributed to reducing GDP in the recent banking crisis. The expansionary monetary policy has partly counterbalanced this decline in the Euro area. |
| Matteo Ciccarelli has earned his Ph.D. in Economics at Pompeu Fabra University, Barcelona, Spain, in 2001. He has worked as an Assistant Professor of Econometrics at University of Alicante, as a consultant at the Research Department of the World Bank, and as a research fellow at the Ente Einaudi and the Bank of Spain. He currently works in the Econometric Modelling Division at the Research Department of the European Central Bank, in a team of Economists responsible for building and maintaining econometric models for the Euro area and EU Member States, for conducting research in the areas of cyclical indicators and short-term forecasting tools, and for making projections and forecasts using econometric models. |
| Contact information: |
| Erik Kole |
