What do a million observations on banks say about the transmission of monetary policy?

We study the monetary-transmission mechanism with a data set that includes quarterly observations of every insured U.S. commercial bank from 1976 to 1 993. We find that the impact of monetary policy on lending is stronger for banks with less liquid balance sheets-i.e., banks with lower ratios of secu rities to assets. Moreover, this pattern is largely attributable to the sma ller banks, those in the bottom 95 percent of the size distribution. Our re sults support the existence of a "bank lending channel" of monetary transmi ssion, though they do not allow us to make precise statements about its qua ntitative importance. (JEL E44, E52, G32).