Heterogeneous Bank Lending Responses to Monetary Policy New.pdf

WP/13/118 Heterogeneous Bank Lending Responses to Monetary Policy: New Evidence from a Real-time Identification John C. Bluedorn, Christopher Bowdler, and Christoffer Koch © 2013 International Monetary Fund WP/13/ IMF Working Paper Research Department Heterogeneous Bank Lending Responses to Monetary Policy: New Evidence from a Real-time Identification1 John C. Bluedorn Christopher Bowdler Christoffer Koch Research Department Department of Economics Research Department International Monetary Fund University of Oxford Federal Reserve Bank of Dallas Authorized for distribution by Thomas Helbling May 2013 This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. Abstract We present new evidence on how heterogeneity in banks interacts with monetary policy changes to impact bank lending. Using an exogenous policy measure identified from narratives on FOMC intentions and real-time economic forecasts, we find much greater heterogeneity in U.S. bank lending responses than that found in previous research based on realized federal funds rate changes. Our findings suggest that studies using realized monetary policy changes confou