Monetary transmission and regulatory impacts: empirical evidence from the post-crisis banking literature

The extent and severity of the recent financial crisis has spurred both theoretical and empirical research in the areas of macroeconomics and financial economics, largely analyzing the challenges faced or imposed by the banking sector. The focus of this chapter is placed on the empirical work that determines the relevance of banks in the monetary policy transmission mechanism, or points to regulatory and macroprudential challenges within the banking sector. While the lending channel had already been investigated prior to the crisis, the identification of the risk channel gained the attention of researchers mostly in the post-crisis literature. Empirical advances have been made on several fronts: the increased availability and use of detailed micro-data, as well as (re)development and application of several methodological approaches, have allowed solving for previously existing identification drawbacks. Furthermore, research on regulatory implications of banks’ operations has proposed new ways of measuring the risk which institutions pose for the system, and suggested possible regulatory and macroprudential improvements.