Changes in Bank Lending Standards and the Macroeconomy

John C. Driscoll, Egon Zakrajsek, Mary Beth Chosak, William F. Bassett
2012 Social Science Research Network  
Identifying macroeconomic effects of credit shocks is difficult because many of the same factors that influence the supply of loans also affect the demand for credit. Using bank-level responses to the Federal Reserve's Loan Officer Opinion Survey, we construct a new credit supply indicator: changes in lending standards, adjusted for the macroeconomic and bank-specific factors that also affect loan demand. Tightening shocks to this credit supply indicator lead to a substantial decline in output
more » ... nd the capacity of businesses and households to borrow from banks, as well as to a widening of credit spreads and an easing of monetary policy.
doi:10.2139/ssrn.2055221 fatcat:4skf7luwardgjpvb5cqotuqr6u