A study on bank credit channel in Brazil: The approach of impulse response functions matching

Abstract

This study addresses the issue of bank lending channel in Brazil, regarding its operability, and the identification of supply and demand for loans effects. To do so, we specify a stylized model that characterizes the behavior of credit supply of banks in an environment of uncertainty about future monetary policy. Subsequently, the work estimates empirical and theoretical impulse response functions, respectively from VECM and DSGE models and uses calibration techniques to obtain minimal distance parameters between these two functions (matching). The main motivation to implement this methodology is the possibility to separate the components of supply and demand for loans, which is a recurrent issue in this research field

Keywords

• Credit Channel
• VECM
• Monetary Policy