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Monetary Transmission Through Community and Noncommunity Bank Lending

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Abstract

This paper examines the dynamic macroeconomic effects of monetary transmission through community and noncommunity bank lending in the United States. I find that while both types of banks amplify the impact of monetary policy shocks on output, community banks exhibit a more delayed and persistent amplificatory influence than their noncommunity counterparts. These results suggest that continued decline in community banks' market share may dampen the efficacy of monetary policy over longer horizons. Moreover, the adverse real effects of monetary tightening are likely to be longer-lasting for small business borrowers who depend on community banks for funding.

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  • Nikolaishvili, Giorgi, 2025. "Monetary Transmission Through Community and Noncommunity Bank Lending," Working Papers 123, Wake Forest University, Economics Department.
    • Handle: RePEc:ris:wfuewp:0123
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    Keywords

    Community banks; FAVAR; lending channel; monetary policy; relationship lending;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • 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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