Does the Development of Non-Cash Payments Affect Bank Lending?

Abstract

Previous studies show that the impact of an exogenous monetary policy shock on bank lending is different across bank sizes and across various levels of capitalization and liquidity. However, there is little evidence on the impact of other exogenous influences such as the shift from cash to non-cash payment instruments on bank lending. In this paper we explore the effects of the increasing use of non-cash payment instruments on bank lending in Spain during 1992–2000. The results show that banks appear to have taken advantage of the non-cash instruments to adjust their loan supply when interest rates increase.