Document Type

Article

Publication Title

British Journal of Economics, Management, and Trade

Department

Economics

ISSN

2278-098X

Volume

4

Issue

1

DOI

10.9734/BJEMT/2014/6255

First Page

16

Last Page

34

Publication Date

1-1-2014

Abstract

This paper examines whether banks that sell loans in the secondary market respond differently to a monetary policy innovation from those that do not engage in loan sales. We answer this question by measuring the policy response while controlling for loan sales activities. Using a simple theoretical model and U.S. bank-level Call Report longitudinal data for the period 1991Q1-2008 Q4, we conduct a dynamic panel regression analysis. We find that the long-run response to a typical policy shock is three times greater for mid-size banks engaging in loan sales. Given the increase in proportion of banks engaging in loan sales, this finding has strong implications for policy makers and bank industry volatility.

Download

Included in

Economics Commons

Share

COinS