The Credit Channel and the Role of Monetary Policy (OeNB/JF)

The aim of this research project is to study empirically the relationship of monetary policy and credit supply in due consideration of the causation identification problem. The empirical analysis is based on a unique, interlinked micro-dataset drawn from banks and business firms of the Austrian economy. This unique data-set allows for the distinction between demand and supply effects in times of credit contraction, that is, in the aftermath of the global financial crisis in 2008-09. The final sample will cover the period from 2004 to 2015. The centre of this research project is the methodological framework capable of coping with causation identification in applied credit contraction analysis. Contrary to the most widely used approach in economics to identify causal effects – the instrumental variable technique – we base our causation analysis approach on information gained from a "quasi-natural experiment" triggered by the financial market crisis in 2008-09.