Is there a broad credit channel for monetary policy?
Abstract: Using data for the U.S. manufacturing sector, we test for the existence of a broad credit channel for monetary policy, which operates through the total supply of loans. Our test focuses on the relationship between internal funds and business investment. After a monetary tightening, we find that this relationship becomes much closer for small firms but not for large firms. In contrast, after a monetary easing, the relationship is little changed for all firms. This evidence supports the existence of a broad credit channel.
File(s): File format is application/pdf http://www.frbsf.org/econrsrch/econrev/96-1/3-13.pdf
Provider: Federal Reserve Bank of San Francisco
Part of Series: Economic Review
Publication Date: 1996
Order Number: 1