Inside the Black Box: The Credit Channel of Monetary Policy Transmission

@inproceedings{Bernanke1995InsideTB,
  title={Inside the Black Box: The Credit Channel of Monetary Policy Transmission},
  author={B. Bernanke and M. Gertler},
  year={1995}
}
  • B. Bernanke, M. Gertler
  • Published 1995
  • Economics
  • The 'credit channel' theory of monetary policy transmission holds that informational frictions in credit markets worsen during tight- money periods. The resulting increase in the external finance premium--the difference in cost between internal and external funds-- enhances the effects of monetary policy on the real economy. We document the responses of GDP and its components to monetary policy shocks and describe how the credit channel helps explain the facts. We discuss two main components of… CONTINUE READING
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