Scandinavian Working Papers in Economics

Working Paper Series,
Sveriges Riksbank (Central Bank of Sweden)

No 73: Bank Loans and the Transmission Mechanism of Monetary Policy

Kerstin Hallsten ()
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Kerstin Hallsten: Monetary Policy Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden

Abstract: How monetary policy affects the economy is a central topic of debate in macroeconomics. The bank lending channel is one approach that emphasises the role of banks. Banks are important because of asymmetric information in the financial market. Banks are assumed to be better at handling information problems than other lenders. In this paper it is analysed how monetary policy works when there is a bank lending channel and then it is tested for the importance of this channel using Swedish data.

Keywords: Bank loans; Transmission mechanism; Monetary policy

JEL-codes: E50

44 pages, November 1, 1998

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