Monetary policy and credit flows

Bianco, Timothy

doi:10.1016/j.jmacro.2021.103362

Monetary policy and credit flows

Persistent URL

https://dspace.allegheny.edu/handle/10456/55464

Author(s)

Bianco, Timothy

Date Issued

December 2021

Abstract

The paper assesses the impact of monetary policy shocks on credit reallocation and evaluates the importance of theoretical monetary policy transmission mechanisms. Compustat data covering 1974 through 2017 is used to compute quarterly measures of credit flows of borrowing firms. I find that expansionary monetary policy is associated with positive long-term credit creation and credit destruction (i.e. credit reallocation). This impact is larger for financially constrained firms and those that are perceived as relatively risky to the lender. This is predicted by the balance sheet channel of monetary policy and mechanisms that reduce lenders' risk perceptions and increase the tendency to search for yield.

Journal

Journal of Macroeconomics

Department

Business and Economics

Citation

Bianco, Timothy. "Monetary Policy and Credit Flows." Journal of Macroeconomics 70, (2021): 103362. doi:10.1016/j.jmacro.2021.103362. http://dx.doi.org/10.1016/j.jmacro.2021.103362

Publisher

Elsevier

Version of Article

Published article

DOI

10.1016/j.jmacro.2021.103362

ISSN

0164-0704

1873-152X

Rights

Subjects

Credit reallocation

Credit constraints

Monetary policy trans...

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