American Economic Review Vol. 83 No. 1 1993
Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance
Abstract
In this paper, we use the relative moments in bank loans and commercial paper to provide evidence on the existence of a loan-supply channel of monetary-policy transmission. We find that tighter monetary policy leads to a shift in firms' mix of external financing: commercial paper issuance rises while bank loans fall. This suggests that contractionary policy can indeed reduce loan supply. Furthermore, such shifts in loan supply seem to affect investment, even controlling for interest rates and output.
- Volume
- 83
- Issue
- 1
- Pages
- 78-98
- Sources
- bibtex:phds-export.bib