Journal of Banking & Finance Vol. 30 No. 1 2006
Bank capital and loan asymmetry in the transmission of monetary policy
Abstract
Utilizing a bank-lending channel framework, we investigate the effects of expansionary and contractionary policy separately on the loan behavior of low-capital and high-capital banks, and between pre-Basel/FDICIA and post-Basel/FDICIA periods. Our results show that low-capital banks are adversely affected by contractionary policy. Expansionary policy, however, is not effective in stimulating the loan growth of low-capital banks. These results are consistent with lending channel predictions, but only hold in the post-Basel/FDICIA period when the capital constraint is stringent relative to the pre-Basel/FDICIA period. These asymmetric policy results have implications for the interaction of monetary and capital regulatory policies.
- DOI
- 10.1016/j.jbankfin.2005.05.002
- Volume
- 30
- Issue
- 1
- Pages
- 259-285
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib