IS BANK LENDING IMPORTANT FOR THE TRANSMISSION OF MONETARY-POLICY - AN OVERVIEW

To improve our understanding of the role of banks in the transmission of monetary policy, the Federal Reserve Bank of Boston convened a conf erence in June of 1995 to consider the question, ''Is Bank Lending Imp ortant for the Transmission of Monetary Policy?'' That banks are an im portant element in the transmission process is not an issue, because m onetary policy operates through the banking sector. However, the descr iption of the exact role played by banks remains hotly disputed, with the debate focusing on the importance of the role for bank lending as a transmission channel (the lending view) distinct from the generally accepted channel operating through interest rates (the money view). Ba nkers, economists, and other financial specialists met to discuss whet her bank lending should be considered an important component of the tr ansmission of monetary policy. Proponents argued that changes in bank assets as well as bank liabilities influence the future course of the economy. Many economists remain skeptical of the role of banks, howeve r, believing that a focus on interest rates or money aggregates is suf ficient for understanding the transmission of monetary policy. This ar ticle presents an overview of the papers presented at the conference a nd the comments of their discussants.