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A Differential View on the Credit Channel of Monetary Policy Transmission

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Kempa, B., Holtrup, H., Hendricks, T. A Differential View on the Credit Channel of Monetary Policy Transmission. Credit and Capital Markets – Kredit und Kapital, 39(4), 537-549. https://doi.org/10.3790/ccm.39.4.537
Kempa, Bernd; Holtrup, Hans-Jürgen and Hendricks, Torben "A Differential View on the Credit Channel of Monetary Policy Transmission" Credit and Capital Markets – Kredit und Kapital 39.4, 2006, 537-549. https://doi.org/10.3790/ccm.39.4.537
Kempa, Bernd/Holtrup, Hans-Jürgen/Hendricks, Torben (2006): A Differential View on the Credit Channel of Monetary Policy Transmission, in: Credit and Capital Markets – Kredit und Kapital, vol. 39, iss. 4, 537-549, [online] https://doi.org/10.3790/ccm.39.4.537

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A Differential View on the Credit Channel of Monetary Policy Transmission

Kempa, Bernd | Holtrup, Hans-Jürgen | Hendricks, Torben

Credit and Capital Markets – Kredit und Kapital, Vol. 39 (2006), Iss. 4 : pp. 537–549

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Article Details

Author Details

Bernd Kempa, Frankfurt (Oder)

Hans-Jürgen Holtrup, Essen

Torben Hendricks, Essen

References

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Abstract

This paper analyzes the effectiveness of the credit channel as a transmission mechanism of monetary policy by applying a Markov switching approach on the default premium of U.S. corporate bond portfolios. Beside the stance of monetary policy and the state of the business cycle, we identify a latent factor determining the quality spread of the bond portfolios and the strength of the credit channel. In particular, the credit channel appears to be active only in periods of financial distress, such as the Latin American debt crisis of the early 1980s, the savings and loan debacle, as well as the events surrounding the 9/11 terror attacks and the subsequent accounting scandals. (JEL C22, E51)