Hidden Bibliographic Details
| Other authors / contributors: | Zicchino, Lea.
Habermeier, Karl Friedrich.
International Monetary Fund. Monetary and Capital Markets Department.
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| ISBN: | 1462302319
9781462302314
1452767238
9781452767239
9786612841835
6612841834
1451870906
9781451870909
1282841831
9781282841833
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| Notes: | At head of title: Monetary and Capital Markets Department.
"September 2008."
Includes bibliographical references.
English.
Online resource; title from PDF front page (ebrary, viewed February 26, 2014).
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| Summary: | We assess the extent to which loan losses affect banks' provision of credit to companies and households and examine how feedback from losses to a reduction in credit is affected by the monetary policy stance. Using a unique cross-country dataset of more than 600 banks from 32 countries, we find that losses lead to a reduction in credit and that this effect is more pronounced when either initial bank capitalization is thin or when monetary policy is tight. Moreover, in the face of credit losses, ample capital is more important in cushioning the effect of loan losses when monetary policy is tight. In other words, capital buffers and accommodating monetary policy act as 'substitutes' in offsetting the adverse effect of losses on loan growth. While most of these effects are stronger in crisis times, we find them to operate both in and outside full-blown banking crises. These findings have important implications for the interplay between financial stability and monetary policy, which this paper also draws out.
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| Other form: | Print version: Nier, Erlend. Bank losses, monetary policy and financial stability. Washington, D.C. : International Monetary Fund, ©2008
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