Prof. Dr. Lars Norden (FGV EBAPE & FGV EPGE, Getulio Vargas Foundation, Rio de Janeiro)

Date: Tuesday, May 13, 2025
Time: 10:00 am - 11:30 am
Location: Geschw.-Scholl-Pl. 1, Room C 005
Title: "Relationship Lending and Monetary Policy Shocks: Evidence from the U.S. (A. Berger, C. Bouwman, L. Norden, R. Roman, G. Udell & T. Wang)"
Abstract: We investigate monetary policy transmission in the presence of relationship lending. Analyzing confidential Y-14Q loan-level supervisory data for C&I loans, we find U.S. banks dampen transmission of monetary policy tightening shocks to relationship borrowers by about 40 percent. Finding is well-identified, robust, and consistent with theory. We test hypotheses on relationship lending that may help explain why transmission is less for large banks and for those in different economic environments, finding significant results. Findings overall suggest wherever banks have superior capacity to skirt unexpected monetary policy tightening shocks, they do so by temporarily increasing credit supply to their relationship borrowers.