Historical Perspectives on the Monetary Transmission Mechanism / Jeffrey A. Miron, Christina D. Romer, David N. Weil.

Format:

Book

Author/Creator:

Miron, Jeffrey A.

Contributor:

National Bureau of Economic Research.

Romer, Christina D.

Weil, David N.

Series:

Working Paper Series (National Bureau of Economic Research) no. w4326.

NBER working paper series no. w4326

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1993.

Summary:

This paper examines changes over time in the importance of the lending channel in the transmission of monetary shocks to the real economy. We first use a simple extension of the Bernanke-Blinder model to isolate the observable factors that affect the strength of the lending channel. We then show that based on changes in the structure of banks assets, reserve requirements, and the composition of external firm finance, the lending channel should have been stronger before 1929 than during the post-World War II period, especially the first half of this period. Finally, we demonstrate that conventional indicators of the importance of the lending channel, such as the spread between the loan rate and the bond rate and the correlation between loans and output, do not show the predicted decline in the importance of lending over time. From this we conclude that either the traditional indicators are not useful measures of the strength of the lending channel or that the lending channel has not been quantitatively important in any era.

Notes:

Print version record

April 1993.