The authors investigate the impact of 'credit shocks' on real activity by using changes in reserve requirements to measure shocks to financial intermediation. Reserve requirement changes are often made for bank regulatory reasons and, hence, are far more exogenous with respect to macroeconomic...

This paper provides evidence on the importance of the credit channel in the transmission of monetary policy. Changes in reserve requirements are used to measure "credit shocks." Reserve requirement changes are often made for regulatory reasons, and hence provide a more exogenous measure of...