Abstract

This paper addresses the relevance of the bank lending channel in the transmission of monetary policy in Germany on the basis of a structural vector error correction model (VECM). In order to deal with the fundamental problem of identification we use restriction tests on cointegration vectors to identify long-run supply and demand relationships in the market for bank loans. We find empirical evidence that is consistent with a bank lending channel in Germany. To our knowledge, this analysis is the first study that looks at the German loan market in the context of monetary transmission by applying such a structural approach to aggregate data.

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