scholarly journals Crossing the Credit Channel

2020 ◽  
Vol 20 (267) ◽  
Author(s):  
Gareth Anderson ◽  
Ambrogio Cesa-Bianchi
Keyword(s):  
Monetary Policy ◽  
Crucial Role ◽  
Financial Intermediation ◽  
Large Fraction ◽  
Balance Sheet ◽  
Transmission Mechanism ◽  
Credit Spreads ◽  
Credit Channel ◽  
Pronounced Increase ◽  
Financial Firms

Credit spreads rise after a monetary policy tightening, yet spread reactions are heterogeneous across firms. Exploiting information from a panel of corporate bonds matched with balance sheet data for U.S. non-financial firms, we document that firms with high leverage experience a more pronounced increase in credit spreads than firms with low leverage. A large fraction of this increase is due to a component of credit spreads that is in excess of firms' expected default. Our results suggest that frictions in the financial intermediation sector play a crucial role in shaping the transmission mechanism of monetary policy.

The Channels of Transmission of Monetary Policy

2021 ◽  
pp. 45-88
Author(s):  
Juan Antonio Morales ◽  
Paul Reding
Keyword(s):  
Monetary Policy ◽  
Emerging Market ◽  
Asset Price ◽  
Balance Sheet ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Monetary Transmission Mechanism ◽  
The Interest Rate ◽  
The Impact ◽  
Transmission Of Monetary Policy

This chapter explores the monetary transmission mechanism (MTM) in low financial development countries (LFDCs). It successively discusses the interest rate, asset price, bank credit, balance sheet, expectations, and real balance channels. For each channel, conceptual aspects about how it operates, how it transmits monetary policy impulses to the economy’s financial and real spheres, are first presented. Next, the impact of the specificities of LFDCs on the channel’s strength and reliability are examined and the available empirical evidence is surveyed. The chapter concludes with a global assessment of the effectiveness of the monetary transmission mechanism in LFDCs. Evidence points to a transmission mechanism that is effective although not very strong, and possibly also more uncertain than in advanced and emerging market countries.

scholarly journals The transmission mechanism of unconventional monetary policy

2016 ◽  
Vol 7 (1) ◽  
pp. 7 ◽  
Author(s):  
Jakub Janus
Keyword(s):  
Monetary Policy ◽  
Balance Sheet ◽  
Policy Instruments ◽  
Central Banking ◽  
Transmission Mechanism ◽  
Significant Shift ◽  
Unconventional Monetary Policy ◽  
Relative Significance ◽  
Interest Rate Policy ◽  
Economic Agents

The implementation of unconventional (nonstandard) monetary policy instruments by the leading central banks at the wake of the financial and economic crisis was the most significant shift in the practice of central banking in the recent years. Evaluation of their effects is not feasible without a thorough recognition of the transmission mechanism of various balance-sheet policies, such as quantitative easing. The transmission channels of a standard interest-rate policy are based on a group of theories that are relatively coherent and well-documented. On the contrary, identification of similar framework for unconventional measures proved to be a complicated task. The aim of this paper is to extract and evaluate the theoretical efficiency of particular channels of unconventional monetary policy. This goal requires references to at least several, to some extent mutually exclusive, theories. It is also inevitable to draw one’s attention to the relative significance of identified channels, depending on the nature of used unconventional tools, as well as on reactions of financial institutions and other economic agents to undertaken actions. This paper discusses three broad channel of the unconventional policies transmission mechanism: the signaling channel, the liquidity channel, and the portfolio-balance channel.

Asymmetric Information and the Transmission Mechanism of Monetary Policy

2007 ◽  
Vol 8 (3) ◽  
pp. 428-446 ◽  
Author(s):  
Ulrike Neyer
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Asymmetric Information ◽  
Credit Markets ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Credit Channel ◽  
Absolute Value ◽  
Monetary Transmission Mechanism ◽  
External Finance

Abstract This paper analyses the consequences of asymmetric information in credit markets for the monetary transmission mechanism. It shows that asymmetric information can not only reinforce but can also weaken or overcompensate the effects of the standard interest rate channel. Crucial is that informational problems lead to an external finance premium that can be positive or negative for marginal entrepreneurs. Tight money may lead to an increase in the absolute value of this premium, implying that there is a credit channel of monetary policy, but its working direction is ambiguous.

scholarly journals THE CREDIT SUPPLY CHANNEL OF MONETARY POLICY TRANSMISSION MECHANISM: AN EMPIRICAL INVESTIGATION OF ISLAMIC BANKS IN PAKISTAN VERSUS MALAYSIA

2019 ◽  
Vol 5 (1) ◽  
Author(s):  
Syed Muhammad Abdul Rehman Shah
Keyword(s):  
Monetary Policy ◽  
Balance Sheet ◽  
Banking System ◽  
Real Income ◽  
Transmission Mechanism ◽  
Islamic Banks ◽  
Differential Impact ◽  
Credit Supply ◽  
Balance Sheet Channel ◽  
Supply Channel

The transmission mechanism of monetary policy is explained through the relationshipsbetween a change in money supply and the level of real income. Monetary policytransmits to the real sector through several different channels. Such channels includethe interest rate channel, the exchange rate channel, the asset-pricing channel, the creditsupply channel, and the bank balance sheet channel. This paper empirically investigatesthe credit supply channel of monetary policy and explores the differential impact ofmonetary policy on credit supply of Islamic banks in Pakistan versus Malaysia. Therobust two-step System-Generalize Method of Moments (GMM) estimator is appliedon an unbalanced panel dataset over the period 2005-2016. While estimating the effectsof three alternative measures of monetary policy on banks’ credit supply, several bankspecificvariables are included in the specification as control variables. We providestrong evidence on the existence of credit supply channel in the baseline models forboth countries and differential impact of monetary policy through Islamic banks inPakistan versus Malaysia in the extended models. Our findings suggest that there isa vital need to consider the nature of Islamic banks while devising the instrumentsof an effective monetary policy in countries with dual banking system like Pakistan,Malaysia, Indonesia, Bahrain, Saudi Arabia, Qatar and others.

scholarly journals Inside the Black Box: The Credit Channel of Monetary Policy Transmission

1995 ◽  
Vol 9 (4) ◽  
pp. 27-48 ◽  
Author(s):  
Ben S Bernanke ◽  
Mark Gertler
Keyword(s):  
Monetary Policy ◽  
Balance Sheet ◽  
Bank Lending ◽  
Credit Channel ◽  
Real Economy ◽  
Monetary Policy Transmission ◽  
Informational Frictions ◽  
Policy Transmission ◽  
Policy Shocks ◽  
The Difference

The ‘credit channel’ theory of monetary policy transmission holds that informational frictions in credit markets worsen during tight-money periods. The resulting increase in the external finance premium--the difference in cost between internal and external funds--enhances the effects of monetary policy on the real economy. The authors document the responses of GDP and its components to monetary policy shocks and describe how the credit channel helps explain the facts. They discuss two main components of this mechanism, the balance sheet and bank lending channels. The authors argue that forecasting exercises using credit aggregates are not valid tests of this theory.

scholarly journals Balance Sheet Channel of Monetary Policy: Evidence from Credit Spreads of Russian Firms

2021 ◽  
Vol 80 (4) ◽  
pp. 3-30
Author(s):  
Filipp Prokopev ◽  
Keyword(s):  
Monetary Policy ◽  
Balance Sheet ◽  
Credit Spreads ◽  
Monetary Shocks ◽  
Monetary Policy Shocks ◽  
Net Worth ◽  
External Finance ◽  
Balance Sheet Channel ◽  
Bond Issuers ◽  
Policy Shocks

In this paper, I analyse the relationship between the credit spreads of Russian bond issuers and monetary policy shocks. According to the theory of demand-side financial imperfections, in the presence of financial frictions, the higher the net worth of a firm, the lower its external finance premium. The theory of the balance sheet channel of monetary policy suggests that monetary shocks may affect the net worth of a firm through debt outflows. Together, these ideas predict that the external finance premium of more indebted companies is more sensitive to monetary policy shocks. However, my empirical findings from the credit spreads of Russian companies do not support this theory.

scholarly journals Bank Lending (Credit) Channel of Monetary Transmission Mechanism

2018 ◽  
Vol 4 (1) ◽  
pp. 93-100
Author(s):  
Quratulain Ezam
Keyword(s):  
Monetary Policy ◽  
Secondary Data ◽  
Bank Lending ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Credit Channel ◽  
Distributed Lag ◽  
Auto Regressive ◽  
Bound Test ◽  
Transmission Of Monetary Policy

The significance of channel of bank lending for the process of transmission of monetary policy is examined employing the model of ARDL (Auto-regressive-distributed lag). This recently established bound test is used in order to determine the description of this model. The data that has been used for this research is based on secondary data of 7 years. The results appear constant with the hypothesis that providing by banks with comparatively frail capital responds great, the modification in the stance of monetary policy than providing by improved capitalized banks.

scholarly journals EFEKTIVITAS QUANTUM CHANNEL DALAM MEKANISME TRANSMIS! KEBIJAKAN MONETER: STUDI KASUS INDONESIA TAHUN 1993 -2005

2007 ◽  
Vol 7 (2) ◽  
pp. 179-198
Author(s):  
Fajar Bambang Hirawan
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Quantum Channel ◽  
Asset Price ◽  
Monetary Economics ◽  
Transmission Mechanism ◽  
Credit Channel ◽  
New Thought ◽  
Crisis Period ◽  
The Stability

In the year 2002, Y. V Reddy introduced a new thought in monetary economics theory, especially about transmission mechanism of monetary policy. Reddy classified the channeIs of transmission mechanism into three types, there are quantum channel, interest rate channel, and asset price channel. Quantum channel consists of two channels, there are money channel and credit channel. This research will examine the differences between money channel and credit channeI, the factors which affect volume of money supply (M2) and credit, the stability of quantum channel, and also effectiveness of quantum channel, especially related on its role to push the economic growth. This research uses a monthly data from the year 1993 until 2005. The analysis of this research divided into three parts of period, pre-crisis period (1993-1996), crisis period (19972OO1), and post-crisis period (2002-2005). In the precrisis period, credit channel more stable in transmission mechanism of monetary policy and more effective to push the economic growth. In the crisis, quantum channel did not effective to push economic growth. In the post-crisis period quantum channel also did not effective to push the economic growth.

Monetary Policy Surprises and Corporate Credit Spreads

2020 ◽  
Author(s):  
Difang Huang ◽  
Xinjie Wang ◽  
Zhaodong Zhong
Keyword(s):  
Monetary Policy ◽  
Credit Spreads ◽  
Corporate Credit
Sign in / Sign up

Export Citation Format

Share Document