Federal Reserve Bank of San Francisco
Is there a broad credit channel for monetary policy?
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.
Stephen D. Oliner & Glenn D. Rudebusch, "Is there a broad credit channel for monetary policy?", Economic Review, Federal Reserve Bank of San Francisco, pages 3-13, 1996.
Keywords: Bank loans ; Monetary policy - United States
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