TY - JOUR AU - Miron,Jeffrey A. AU - Romer,Christina D. AU - Weil,David N. TI - Historical Perspectives on the Monetary Transmission Mechanism JF - National Bureau of Economic Research Working Paper Series VL - No. 4326 PY - 1995 Y2 - January 1995 UR - http://www.nber.org/papers/w4326 L1 - http://www.nber.org/papers/w4326.pdf N1 - Author contact info: Jeffrey A. Miron Department of Economics Harvard University Cambridge, MA 02138 Tel: 781/856-0086 Fax: 617/495-8570 E-Mail: miron@fas.harvard.edu Christina D. Romer Department of Economics University of California, Berkeley 549 Evans Hall, #3880 Berkeley, CA 94720 Tel: 510/642-4317 Fax: 510/642-6615 E-Mail: cromer@econ.berkeley.edu David N. Weil Department of Economics Box B Brown University Providence, RI 02912 Tel: 401/863-1754 Fax: 401/863-1970 E-Mail: david_weil@brown.edu M1 - published as Jeffrey A. Miron, Christina D. Romer, David N. Weil. "Historical Perspectives on the Monetary Transmission Mechanism," in N. Gregory Mankiw, ed., "Monetary Policy" The University of Chicago Press (1994) AB - This paper examines changes over time in the importance of the lending channel in the transmission of monetary shocks to the real economy. We first use a simple extension of the Bernanke-Blinder model to isolate the observable factors that affect the strength of the lending channel. We then show that based on changes in the structure of banks assets, reserve requirements, and the composition of external firm finance, the lending channel should have been stronger before 1929 than during the post-World War II period, especially the first half of this period. Finally, we demonstrate that conventional indicators of the importance of the lending channel, such as the spread between the loan rate and the bond rate and the correlation between loans and output, do not show the predicted decline in the importance of lending over time. From this we conclude that either the traditional indicators are not useful measures of the strength of the lending channel or that the lending channel has not been quantitatively important in any era. ER -