Causal ordering and ‘The bank lending channel’

✍ Scribed by Stephen J. Perez

• Book ID: 101285641
• Publisher: John Wiley and Sons
• Year: 1998
• Tongue: English
• Weight: 148 KB
• Volume: 13
• Category: Article
• ISSN: 0883-7252
• DOI: 10.1002/(sici)1099-1255(199811/12)13:6<613::aid-jae492>3.0.co;2-7

✦ Synopsis

The bank lending channel implies the Federal Reserve can in¯uence real income by controlling the level of intermediated loans. Using the notion of causality developed by Simon (1953) and the causal order methodology developed by Hoover (1990), I test for an operative bank lending channel in the transmission mechanism of monetary policy. I ®nd loans did cause real income; there is evidence that a bank lending channel did exist in the 1960s. The data appears to show, however, that by the early 1990s the bank lending channel was no longer operative.