Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
The recent financial crisis and economic recovery have renewed interest in how monetary policy affects bank lending. Using loan-level data, we analyze the effect of monetary policy on loan originations. Our results show that tightening monetary policy significantly reduces the supply of commercial loans by shortening loan maturity. A 1-percentage-point increase in the federal funds rate reduces the average maturity of loan supply by 3.3 percent, contributing to an 8.2 percent decline in the steady-state loan supply at a typical bank. This channel of monetary policy affects loan supply similarly at small and large banks. Our results have interesting implications for the effects of monetary policy on bank maturity transformation and credit availability.