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The impact of interest rate policy on credit union lending during a crisis period

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  • Nguyen, Lan Thi Mai
  • Luu, Hiep Ngoc
  • Nguyen, Thao Thi Phuong

Abstract

We exploit the variation in the exposure to the Covid-19 pandemic of US states as a quasi-natural experiment to examine the impact of interest rate policy on credit union lending. We find that the interest rate cut can only enhance credit union lending in states that are less affected by the Covid-19 pandemic whilst hampering credit union lending in more affected states. This result is consistent across a number of robustness tests.

Suggested Citation

  • Nguyen, Lan Thi Mai & Luu, Hiep Ngoc & Nguyen, Thao Thi Phuong, 2022. "The impact of interest rate policy on credit union lending during a crisis period," Finance Research Letters, Elsevier, vol. 48(C).
    • Handle: RePEc:eee:finlet:v:48:y:2022:i:c:s1544612322002471
    DOI: 10.1016/j.frl.2022.103005
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    References listed on IDEAS

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    1. Lei Li & Philip E Strahan & Song Zhang, 2020. "Banks as Lenders of First Resort: Evidence from the COVID-19 Crisis," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 9(3), pages 472-500.
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    4. Lei Li & Philip E. Strahan & Song Zhang, 2020. "Banks as Lenders of First Resort: Evidence from the COVID-19 Crisis," NBER Working Papers 27256, National Bureau of Economic Research, Inc.
    5. Akos Horvath & Benjamin S. Kay & Carlo Wix, 2021. "The COVID-19 Shock and Consumer Credit: Evidence from Credit Card Data," Finance and Economics Discussion Series 2021-008, Board of Governors of the Federal Reserve System (U.S.).
    6. Donal G. McKillop & John O.S. Wilson, 2015. "Credit Unions as Cooperative Institutions: Distinctiveness, Performance and Prospects," Social and Environmental Accountability Journal, Taylor & Francis Journals, vol. 35(2), pages 96-112, September.
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    9. von Borstel, Julia & Eickmeier, Sandra & Krippner, Leo, 2016. "The interest rate pass-through in the euro area during the sovereign debt crisis," Journal of International Money and Finance, Elsevier, vol. 68(C), pages 386-402.
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    11. Marianna Pavlovskaya & Craig Borowiak & Maliha Safri & Stephen Healy & Robert Eletto, 2020. "The Place of Common Bond: Can Credit Unions Make Place for Solidarity Economy?," Annals of the American Association of Geographers, Taylor & Francis Journals, vol. 110(4), pages 1278-1299, July.
    12. Leonardo Gambacorta & Anamaria Illes & Marco Jacopo Lombardi, 2015. "Has the Transmission of Policy Rates to Lending Rates Changed in the Wake of the Global Financial Crisis?," International Finance, Wiley Blackwell, vol. 18(3), pages 263-280, December.
    13. Norden, Lars & Mesquita, Daniel & Wang, Weichao, 2021. "COVID-19, policy interventions and credit: The Brazilian experience," Journal of Financial Intermediation, Elsevier, vol. 48(C).
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    Cited by:

    1. Lee, Hangsuck & Ha, Hongjun & Lee, Minha, 2024. "A sharing rule for multi-period interest-sensitive insurance contracts," The North American Journal of Economics and Finance, Elsevier, vol. 71(C).

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    More about this item

    Keywords

    Interest rate cut; Zero policy rate; Credit union lending; Covid-19 pandemic;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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