Introduction to the Symposium on Contemporary Banking Research: The Use of Fixed Effects to Disentangle Loan Demand from Loan Supply

With the onset of the financial crisis, disentangling the effects of loan demand and supply in contemporary banking research has become vital for a proper assessment of supply-related banking shocks. These shocks may negatively affect the real economy through many channels, such as the lending channel of monetary policy transmission, the bank risk-taking channel or the evaluation of macroprudential policy efficiency. All these rely on separating the two lending components. Empirical identification has largely relied on the use of demand-related fixed effects, which has also been applied in several analyses within this symposium. (JEL G21)