DP4724 Bank Loan Components and the Time-Varying Effects of Monetary Policy Shocks

Author(s): Wouter Den Haan, Steven Sumner, Guy Yamashiro
Publication Date: November 2004
Keyword(s): impulse response functions, small and large banks, VAR
JEL(s): E40
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4724

A robust finding for both small and large banks is that in response to a monetary tightening, real estate and consumer loans decrease while C&I loans increase. We also show that in a standard log-linear VAR the impulse response function of an aggregate variable is time varying. The finding that loan components move in opposite directions and the property that the impulse response of total loans is time-varying explain why studies that use total loans have had such a hard time finding a robust response of bank loans to a monetary tightening.