Cover IMF Working Papers
Buy Book in Print
Leaning Against Windy Bank Lending
Author:
Mr. Giovanni Melina
Search for other papers by Mr. Giovanni Melina in
Current site
Google Scholar Close
and
Stefania Villa null

Search for other papers by Stefania Villa in
Current site
Google Scholar Close
Series:
IMF Working Papers
Volume/Issue:
Volume 2017: Issue 179
Language:
English
Publication Date:
31 Jul 2017
DOI:
https://doi.org/10.5089/9781484312674.001
ISBN:
9781484312674
ISSN:
1018-5941
Pages:
68
Keywords:
WP; monetary policy; lending relationships; credit growth; leaning against the wind; Bayesian estimation; optimal monetary policy; monetary policy rule; lending relationship; credit-growth-augmented Taylor rule; rule parameter; growth-Taylor rule; monetary policy rate; Credit; Inflation; Bank credit; Output gap; Loans
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Download PDF (1.8 MB) Download Epub
Using an estimated dynamic stochastic general equilibrium model with banking, this paper first provides evidence that monetary policy reacted to bank loan growth in the US during the Great Moderation. It then shows that the optimized simple interest-rate rule features no response to the growth of bank credit. However, the welfare loss associated to the empirical responsiveness is small. The sources of business cycle fluctuations are crucial in determining whether a “leaning-against-the-wind” policy is optimal or not. In fact, the predominant role of supply shocks in the model gives rise to a trade-off between inflation and financial stabilization.
  • Collapse
  • Expand
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund