Loan components and time varying effects of monetary policy shocks

This paper looks at the responses of bank loan components to a monetary tightening and compares the responses to those observed to output shocks. We find the results to be consistent with both a bank lending channel and a balance sheet channel for consumer loans. In contrast, wee find that C&I loans (and commercial paper) sharply decrease in response to output shocks but increase in response to monetary policy shocks. We argue that these results are hard to reconcile with a bank lending channel that constrains the supply of C&I loans. Instead we give reasons why the supply of C&I loans (and commercial paper) may increase during periods of high interest rates