The Effects of Local Banking Market Structure on the Bank-Lending Channel of Monetary Policy

Posted: 24 Nov 2009

See all articles by robert m adams

robert m adams

affiliation not provided to SSRN

Dean F. Amel

Board of Governors of the Federal Reserve System

Date Written: 2005

Abstract

Examines the impact of monetary policy on thebanking industry, and in turn private-sector borrowing, specifically by smallbusinesses. Changes in monetary policy may impact bank lending through theirimpacts on a bank's costs, and this impactmay vary in relationtothe degree of banking competition in a particular market. The studyanalyzes 1996-2002 loan data collected as part of theCommunityReinvestment Act (CRA) program, which provides the number of business loansmade and their dollar values. Results indicate that as market concentration increases, the volatility inoutstanding securities and loans decreases, which implies that increased marketconcentration in the banking industryleads to less reaction by banks tooutside stimuli.In comparing rural markets to urban markets, the analysisshows that that there is a bank-lending channel effect in rural markets,whereas the urban markets exhibit weaker results.Implications that thisresearch may have on the Federal Reserve's policies are explored.(SRD)

Keywords: Lending policies, Interest (finance), Bank loans, Community Reinvestment Act of 1977, Banking industry, Monetary policies

Suggested Citation

adams, robert m and Amel, Dean F., The Effects of Local Banking Market Structure on the Bank-Lending Channel of Monetary Policy (2005). University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship, Available at SSRN: https://ssrn.com/abstract=1509983

Robert m Adams (Contact Author)

affiliation not provided to SSRN

Dean F. Amel

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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