Introduction to the Symposium on Contemporary Banking Research : The Use of Fixed Effects to Disentangle Loan Demand from Loan Supply

Jakovljević, Sanja and Degryse, Hans and Ongena, Steven (2020) Introduction to the Symposium on Contemporary Banking Research : The Use of Fixed Effects to Disentangle Loan Demand from Loan Supply. Economic Inquiry, 58 (2). pp. 917-920. ISSN 0095-2583

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Abstract

With the onset of the financial crisis, disentangling the effects of loan demand and supply in contemporary banking research has become vital for a proper assessment of supply-related banking shocks. These shocks may negatively affect the real economy through many channels, such as the lending channel of monetary policy transmission, the bank risk-taking channel or the evaluation of macroprudential policy efficiency. All these rely on separating the two lending components. Empirical identification has largely relied on the use of demand-related fixed effects, which has also been applied in several analyses within this Symposium.