Journal Article

Banking and the economy: what are the facts?

Abstract: Cara S. Lown explores the banking industry's role in the economy and finds evidence supporting the idea that fluctuations in bank credit are related to fluctuations in economic activity. She also finds that bank asset holdings adjust before changes in economic activity and that the banking system's security-to-asset ratio strongly predicts economic growth. By analyzing terms of bank lending over the business cycle, Lown concludes that variations in lending terms are consistent with the argument that restrictions on bank credit adversely affect the economy. Lown's study reflects the renewed interest in the role of banking in the economy that has coincided with the failure of many banks and savings and loan associations.

Keywords: Banks and banking; Bank loans; Bank investments;

Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Economic and Financial Policy Review

Publication Date: 1990

Issue: Sep

Pages: 1-14