Bank Loan Supply and Monetary Policy Transmission in Germany: An Assessment Based on Matching Impulse Responses

28 Pages Posted: 14 Jan 2005

See all articles by Oliver Hülsewig

Oliver Hülsewig

Munich University of Applied Sciences; CESifo (Center for Economic Studies and Ifo Institute)

Eric Mayer

University of Würzburg - Institute of Economics and Social Sciences

Timo Wollmershaeuser

Ifo Institute for Economic Research; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: January 2005

Abstract

This paper addresses the credit channel in Germany by using aggregate data. We present a stylized model of the banking firm in which banks decide on their loan supply in light of uncertainty about the future course of monetary policy. Applying a vector error correction model (VECM), we estimate the response of bank loans after a monetary policy shock taking into account the reaction of the output level and the loan rate. We estimate our model to characterize the response of bank loans by matching the theoretical impulse responses with the empirical impulse responses to a monetary policy shock. Evidence in support of the credit channel can be reported.

Keywords: Monetary policy transmission, credit channel, loan supply, loan demand, minimum distance estimation

JEL Classification: E44, E51

Suggested Citation

Hülsewig, Oliver and Mayer, Eric and Wollmershaeuser, Timo, Bank Loan Supply and Monetary Policy Transmission in Germany: An Assessment Based on Matching Impulse Responses (January 2005). Available at SSRN: https://ssrn.com/abstract=648584 or http://dx.doi.org/10.2139/ssrn.648584

Oliver Hülsewig (Contact Author)

Munich University of Applied Sciences ( email )

Munich
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Eric Mayer

University of Würzburg - Institute of Economics and Social Sciences ( email )

Sanderring 2
Wuerzburg, 97070
Germany

Timo Wollmershaeuser

Ifo Institute for Economic Research ( email )

Poschingerstrasse 5
Munich, 81879
Germany
+49 89 9224 1406 (Phone)
+49 89 9224 1462 (Fax)

HOME PAGE: http://www.ifo.de/link/wollmershaeuser_t.htm

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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