What Do Fiscal Stimulus Packages Mean For Household Debt?

We study the links between fiscal stimulus packages during times of crisis and households\u27 liabilities. We do so by using household-level data on income and liabilities from the Consumer Expenditure Survey, and estimating an empirical model along those in the literature on the consumption effects of these packages. We find that receiving a check from the government tends to translate into a reduction in outstanding liabilities for American households. This effect is robust to controlling for income levels and household size. The effects are driven by households whose income is below the median and by those who remain employed during the crisis

Is there a financial accelerator in US banking?: Evidence from the cyclicality of banks' price-cost margins

We show that price-cost margins for US banks are consistently countercyclical, even after controlling for credit risk, the term structure of interest rates and monetary policy. This evidence supports the existence of a "financial accelerator" in US banking.Banks' price-cost margins RBC Financial accelerator

On the firm-level implications of the Bank Lending Channel of monetary policy

Standard models of the Bank Lending Channel are unable to yield predictions on the differential impact of monetary policy shocks over heterogeneous borrowers. This inability has made researchers doubt about the role played by bank credit as a transmission mechanism of monetary policy. Moreover, it has made them reject those models in favor of the Balance Sheet Channel as a transmission mechanism. In this paper we show that an "augmented" version of the Bank Lending Channel that allows for firm heterogeneity (but without any role for firms' balance sheets) reproduces well the dynamics of firm-level data. Our contribution is to show that it is not clear that the Bank Lending Channel should be rejected in favor of alternative theories on the basis of its inability to reproduce firm-level data. Thus, there is additional room for econometric tests that can provide support to the Bank Lending Channel.Credit channel Bank Lending Channel "Flight to Quality" Transmission channels of monetary policy

Competition in banking and the lending channel: Evidence from bank-level data in Asia and Latin America

This paper examines how banking competition affects the transmission of monetary policy through the bank lending channel. We apply a two-step estimation procedure using bank-level panel data for commercial banks in 10 Asian and 10 Latin American countries during the period from 1996 to 2006. In the first step we measure the degree of banking competition by applying the methodology proposed by Panzar and Rosse (1987). In the second step we estimate a loan growth equation where the explanatory variables include the Panzar-Rosse measure of banking competition. The estimation results provide consistent evidence that increased competition in the banking sector weakens the transmission of monetary policy through the bank lending channel. This is especially true for banks in Latin American countries and banks of small size, low liquidity, and low capitalization. We also discuss the policy implications of the main findings of this paper.Banking competition Bank lending channel Monetary policy transmission

Consolidation in banking and the lending channel of monetary transmission: Evidence from Asia and Latin America

This paper examines the relationship between increased consolidation in banking and monetary policy transmission in eighteen Asian and Latin American economies, using bank-level data from 1996 to 2006. Our results provide consistent evidence that as concentration in banking increases, the bank lending channel is weakened, leading the monetary policy transmission mechanism to be less effective. We also investigate how this relationship between concentration and the strength of the lending channel depends on bank-specific characteristics. Using bank-level balance sheet and income statement data allows us, first, to better identify the effects of banking consolidation on the supply-side bank lending channel from those of the demand-side interest rate channel, and second, to test for any systematic differences in the impact of consolidation on monetary policy transmission across banks of different size and financial strength. We also discuss potential explanations for and policy implications of the main findings of this paper.Banking consolidation Bank lending channel Monetary policy transmission