Economics and similar, for the sleep-deprived
A subtle change has been made to the comments links, so they no longer pop up. Does this in any way help with the problem about comments not appearing on permalinked posts, readers?
Update: seemingly not
Update: Oh yeah!
Wednesday, February 24, 2010
Probably the most important thing you won't read this week
The bank lending channel revisited. Yes thank you. No matter how many times we "revisit" this amazingly cut and dried question, the answer is going to be the same - Bernanke & Blinder (1988) are just wrong. Banks make loans and then work out how to fund them, they don't raise deposits and then work out how to lend them. Therefore there basically is no "credit channel" of monetary policy; bank lending is exogenous (or rather, it's exogenous to the monetary policy regime; it's determined to a significant extent by overall macroeconomic conditions but not in a straightforward or easily analysable way).
The fact that banks post-fund rather than pre-funding in general, and that loan decisions are not made on the basis of the supply of deposits, has been available for years and years to anyone who cared to ask, but it's nice to see that you can establish it by econometrics too. And then it's nice to see you can establish it again, ten years after the Bank of England Quarterly Bulletin articles which first established it, via slightly different econometric means. Will this stop people talking about bank lending as if it were a policy instrument, or a cause of the economic outlook rather than a consequence? I very much don't think so. Bernanke & Blinder '88 is like Martin Amis's reputation or those plastic things that hold six-packs together - it simply doesn't biodegrade.
this item posted by the management 2/24/2010 03:43:00 AM