Monetary policy and the banking sector in Chile

This paper considers the existence of a bank lending channel in Chile. Toward that, we collect a data sample of nineteen banks that operated in Chile over January 1999-December 2002. In that period, banks primarily offered loans to firms in the manufacturing and the financial-services sectors (representing 13 and 26 percent of total loans, respectively), and to households through consumption and mortgage loans (at 9 and 10 percent of total loans, respectively). Our estimation results support the existence of a bank lending channel. We find that banks respond asymmetrically to monetary shocks depending upon their own characteristics, and that monetary shocks alter loan portfolio decisions in the aggregate.