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The role of banks in the transmission of monetary policy has been of significance lately. We aim to analyse the bank lending behaviour during changes in monetary policy. We test for loan supply shifts by segregating banks based on their liquidity along with size and capital ratio. This paper employs uninsured, non-reservable liabilities such as time deposits and investigates whether banks are able to insulate themselves during a monetary policy change. We find that the loan supply shock can be neutralized post monetary policy changes. Furthermore, the less liquid and small banks are unable to carry out such operations and are more affected by monetary shocks. This has important implication in the working of commercial banks and effects of monetary policy.

The file attached to this record is the author's final peer reviewed version. The Publisher's final version can be found by following the DOI link. We find that the Central Bank of Nigeria's (CBN) policy of consolidation and restructuring from 2002 to 2008 strengthened the bank lending channel (BLC). We use the Generalised Method of Moments (GMM) two step estimator to test the existence of the BLC using a sample of 23 banks.Our results show that the loan growth is more sensitive to changes in bank size and capitalization. Furthermore, the central bank's restructuring activities improved the impact of the BLC.

Our paper exploits balance sheet data on the South African banking sector in order to analyse the sensitivity of loan supply through the Bank Lending Channel (BLC). Our results show that bank size, capitalization and efficiency are significant bank characteristics that influence the transmission of contractionary monetary shocks through the banking sector. However, less liquid and less capitalised banks are slower increasing the supply of loans during periods of monetary easing suggesting interest rate asymmetry. There are also differences in the sensitivity of loan categories to monetary tightening. We find that smaller banks are more sensitive to private loans than mortgage loans but the reverse is the case for less capitalised banks. On the other hand, public loans and credit card loans are not sensitive to the BLC. Finally, money supply is a less powerful instrument in the transmission of monetary shocks via the BLC than interest rates.

We used bank-level data of Indonesian commercial banks to examine the role of bank capital in bank lending. Indonesian commercial bank capitalization has improved with the implementation of bank restructuring programs after the Asian financial crisis. The capital adequacy ratio has returned to a sound level; however, bank loan disbursement continues to remain low. We examine the bank lending channel in Indonesian banks and investigate the effects of monetary policy on bank lending through bank capital. The results indicate that a well-capitalized bank can increase its provisions of bank loans while still not responding to monetary policy, excepting non-forex banks.

Based on the research of (Bowman, et al., 2011) regarding the effectiveness of Japanese QE, this thesis aims to evaluate the effectiveness of QE programs in the US and Euro Area regarding lending growth. In order to do so, commercial banks from the US and Euro Area have been analyzed. Using panel regressions on banks’ balance sheet data, results identified that only the third round of the QE (2012-2014) in the United States had a significant effect on lending growth, while the first two QEs in US (2009-2011) mainly used to ease the distress in the banking sector. In the Euro Area, the recently (2015) implemented QE program did not have any significant effect on lending growth. However, results provide evidence that in both areas, banks used that extra liquidity mostly to reduce their interbank borrowings. Moreover, in US, the main driver of lending growth other than the obvious customer deposits, was the ratio of nonperforming loans. While, in Europe, EA banks’ recapitalizations in 2013, allowed them to fire sale their NPLs reducing thus their ratio.

We provide new evidence on the bank lending channel of monetary policy using bank-level data of 440 banks from eleven CEE transition economies between 1998 and 2012. Our findings are: i) banks adjust their loans to changes in host country's monetary policy, ii) foreign-owned banks are less responsive to monetary policy of a host country than domestic-owned banks in both normal and crisis times, iii) foreign parent bank characteristics are irrelevant for the bank lending channel. We propose market segmentation hypothesis that can account for those facts better than the alternative, the internal market hypothesis. Foreign banks have a competitive advantage so that their loan portfolio adjusts less to changes in monetary policy. As a consequence, an increase in foreign penetration of the banking sector does not render monetary policy less effective.

Unemployment is one of the most visible effects of financial crises. We contribute to the empirical literature on the employment effects of a decline in bank credit, investigating individual heterogeneity across firms, workers and jobs in response to a financial shock. We use a rich data set of over 1.5 million individual job contracts in an Italian region, which is matched with the universe of firms and their lending banks. To isolate the effect of the financial shock we construct a firm-specific time-varying measure of credit supply. Our findings indicate that a 10 percent supply-driven credit contraction reduces employment by 2.5 percent. The effect is mostly concentrated among relatively less-educated and less-skilled workers with temporary contracts, and is consistent with the presence of a “dual” labor market and a skill-upgrade strategy adopted by firms in response to the financial shock.

We analyze the impact of balance-sheet strength on credit availability. Bank balance sheets are weak in crisis times, but so are those of firms, and credit demand is then also weak. For identification, we exploit an administrative dataset of loan applications matched with bank and firm variables covering Spain from 2002 to 2010. Bank balance-sheet strength determines the granting of loan applications only in crisis times, while firm balance-sheet strength – notably leverage – determines strongly this granting in both good and crisis times. Our findings underscore the importance of the strength of corporate balance sheets over credit supply for credit availability. Ongena acknowledges financial support from the European Research Council Advanced Grant (project 740272) and Peydró acknowledges financial support from ECO2015-68182-P (MINECO/FEDER, UE) and from the European Research Council Grant (project 648398).

Counter to the credit channel of monetary transmission, monetary policy tightening induces a rise in lending by two different types of non-bank financial institutions (NBFI): shadow banks and investment funds. A monetary DSGE model is able to replicate the empirical facts when augmented with interme- diaries that allow for regulatory arbitrage on the one hand, and household portfolio rebalancing on the other. Therefore NBFI reduce the effectiveness of the bank lending channel, which posits a decrease in bank lending following monetary tightening. Given the pending regulation of the fnancial system, I study how regulation of the shadow banking sector may affect the monetary transmission mechanism, especially during a zero lower bound (ZLB) episode. I find that bringing shadow banks back onto the balance sheets of commercial banks is beneficial for consumption smoothing. Alternatively, regulating them like investment funds results in a milder recession during, and a quicker escape from, the ZLB. This is because a large demand shock that moves the economy to the ZLB acts in a similar way to a monetary tightening due to the inability to lower the policy rate to the unconstrained level. Consequently, the bank lending channel becomes operational and its effectiveness can be reduced via less reliance on deposit funding.

China’s outstanding growth performance of recent years, the ongoing liberalisation of its capital market, and its deepening integration into the world economy provide ample motivation for a deeper understanding of the country’s economic policy-making. This dissertation is an attempt to better understand monetary policy operations and transmission in this rapidly evolving situation. Monetary policy in China is unique compared to any other country in terms of both the available policy instruments and the policy environment. The policy regime is transitioning to a more market-orientated one, and presently the central bank uses a mixture of quantity-based and price-based instruments. These special features are addressed in this dissertation. The dissertation is comprised of four independent but related essays that empirically evaluate monetary policy implementation and the policy environment in China. The first essay examines the relevance of a quantity-based McCallum-type policy rule in achieving price stability. The findings are that deviations in money supply from the rule help to forecast price developments and thus underline the relation between money supply and prices in China. The second essay considers a wider selection of possible policy rules and examines the monetary policy implementation and instruments used by the central bank. Money supply and interest rate instruments are found to react differently to price and output developments. The interest rate instrument is gaining weight over time, which highlights China’s transition to a more market-based policy setting. The third essay utilises bank-level data to study monetary policy transmission and the existence of the bank lending channel in China. Changes in the reserve requirement ratio are found to affect bank lending in China in a similar manner as changes in interest rates. Different types of banks (by ownership) react differently to these changes, but no robust evidence of a bank lending channel is found. The fourth essay compares the economic dynamics in a DSGE modelling framework under the assumption that China can successfully rebalance its economy and achieve a lower savings rate and higher level of domestic consumption. The rebalancing does not notably affect the transmission of monetary policy shocks, but it does render the economy more resilient to technology shocks. Tiivistelmä Kiinan nopea talouskasvu, pääomamarkkinoiden avaaminen ja maan tiiviimpi kytkeytyminen maailmantalouteen ovat johtaneet siihen, että Kiinan talouspolitiikan ymmärtäminen on aiempaa tärkeämpää. Tämän väitöskirjan tavoitteena on perehtyä Kiinan rahapolitiikkatoimiin ja politiikan välittymiseen nopeasti muuttuvassa ympäristössä. Rahapolitiikka Kiinassa eroaa muiden maiden rahapolitiikasta niin käytössä olevien instrumenttien kuin politiikkaympäristönkin kannalta. Kiina on siirtymävaiheessa kohti markkinaperusteisempaa rahapolitiikkaa, ja tällä hetkellä maan keskuspankki käyttää sekä hinta- että määräperusteisia instrumentteja. Näitä erityispiirteitä tarkastellaan tähän väitöskirjaan sisältyvissä tutkimuksissa. Väitöskirja koostuu neljästä yksittäisestä mutta toisiinsa liittyvästä esseestä, joissa tarkastellaan empiirisesti rahapolitiikan toteutusta sekä politiikkaympäristöä Kiinassa. Ensimmäisessä esseessä käsitellään määräperusteisen McCallum-rahapolitiikkasäännön käyttökelpoisuutta hintavakaustavoitteen saavuttamisessa. Havaitut poikkeamat säännön suosittelemasta rahamäärän kasvusta parantavat inflaatioennusteita, mikä korostaa rahan tarjonnan ja hintakehityksen välistä suhdetta. Toisessa esseessä hyödynnetään useampia mahdollisia rahapolitiikkasääntöjä ja tarkastellaan rahapolitiikan toteutusta ja keskuspankin käyttämiä politiikkainstrumentteja. Rahan tarjonnan ja korkoinstrumentin havaitaan reagoivan eri tavoin hintakehitykseen ja tuotannon kasvuun. Korkoinstrumentin painoarvo kasvaa ajan kuluessa, mikä osoittaa Kiinan olevan siirtymässä kohti markkinaperusteisempaa politiikkaa. Kolmannessa esseessä hyödynnetään pankkikohtaista aineistoa ja tarkastellaan rahapolitiikan välittymistä ja pankkilainakanavan olemassaoloa. Keskuspankin varantovaatimusmuutosten havaitaan vaikuttavan pankkien lainanantoon samalla tavoin korkomuutosten kanssa. Omistustyypin mukaan jaoteltuna erilaiset pankit reagoivat eri tavoin rahapolitiikan muutoksiin. Tutkimuksessa ei kuitenkaan löydy vankkaa tukea pankkilainakanavan olemassaololle. Neljännessä esseessä tarkastellaan talouden dynamiikkaa DSGE-mallikehikossa olettaen, että Kiina onnistuu tasapainottamaan talouttaan niin, että säästämisaste laskee ja kotimaisen kulutuksen osuus taloudessa kasvaa. Tasapainottaminen ei merkittävästi vaikuta rahapolitiikkasokkien välittymiseen, mutta tekee taloudesta vähemmän herkän teknologiasokeille.

The shocks to real estate prices potentially have effects on banks' balance sheets, their lending behavior, and eventually economic activities. We examine the existence of the bank lending channel in Japan during the 2007–2013 global financial crisis. We identify the heterogeneous shocks to real estate prices that affect banks by summarizing the land prices of their borrowing firms. We use a comprehensive database on firm-bank relationships as well as information on land prices for more than 20,000 locational points in Japan. We find that after controlling for fixed effects, a bank that faces a rise in land prices increases its capital, total loans, real estate loans, and loans backed by real estate collateral. We also find that the increased land prices do not significantly change the amount of non-real estate loans or loans without real estate collateral. Further, after controlling for time-varying firm fixed effects, increased land prices cause banks to reduce their transactional relationships with firms both in terms of extensive and intensive margins. We provide several possible explanations for the difference in the results between bank-level estimations and matched bank-firm estimations., 基盤研究(S) = Grants-in-Aid for Scientific Research (S)

WOS: 000301660000005, In this article we aim to analyse the role of credit channel in the monetary transmission mechanism under different inflationary environments in Turkey covering the period from January 1986 to October 2009. Our results suggest that traditional interest rate channel is only valid for the post-inflation targeting period. This variable is also a more effective monetary policy tool in terms of its impacts on economic activity in both the regimes. Credit shocks itself have significant power on economic activity and prices. However, the effect of monetary shocks on credit volume is very limited, especially in the low-inflation regime.

The effect of a change in monetary policy on output operates through monetary transmission channels. The transmission channels of monetary policy may be gathered in five main titles: interest rates channel, asset prices channel, exchange rate channel, credit channel (bank lending channel, balance sheet channel) and expectation channel. Findings obtained from the analysis of the transmission channels can be used in policy determination.This paper empirically analyzes the bank lending channel, one of the transmission mechanisms of monetary policy in Turkey. In this paper, data between 1996:06-2006:09 are examined using VAR methodology. According to the findings, the credit channel in Turkey operates partially.

The increased financial disintermediation that characterizes the Malaysia's financial system since the early 1990s has contributed towards changes in the dynamics of monetary transmission mechanism. Using quarterly data from 1980: 1 to 2005: 4, we found a greater effectiveness of monetary policy during the pre-1990:3 period, but the post-1990:3 period poses much difficulty for the conduct of monetary policy. Innovations in the financial market appeared to have led to lower output variability. Further, when the real interest rate is made a function of financial disintermediation, the real interest rate appeared to have lost its significance in influencing real variables in the post-1990: 3 period. This study did not, however, find evidence in support of the significance of the real interest rate in affecting real variables through the direct financing channel via the capital market.

This paper assesses the spillover effects of the United States' unconventional monetary policy (i.e., quantitative easing programs adopted during 2008-2014) on the Asian credit market. With a focus on cross-border bank lending, we employed firm-level loan data with regard to the syndicated loan market and measured the international bank lending channel through changes in United States dollar-denominated loans extended to Asian borrowers. We found that the growth of dollar credit in Asia increased substantially in response to quantitative easing in the United States financial market. The results of this study confirm the existence of the bank lending channel in Asia and emphasize the role of credit flows in transmitting financial conditions. The paper also provides new evidence of cross-border liquidity spillover in the syndicated loan market. We found that the overall spillover effect was large but differed significantly in Asia by types of borrowing firms, financing purposes, and loan terms at different stages of the quantitative easing programs. The paper concludes with a discussion of relevant policy implications for the region.

We study how monetary policy affects the funding composition of the banking sector. When monetary tightening reduces the retail deposit supply owing to, for example, a decrease in bank reserves or in money demand, banks try to substitute the deposit outflows with more wholesale funding in order to mitigate the policy impact on their lending. Banks have varying degrees of accessibility to wholesale funding sources because of financial frictions, and those banks that are large or that have a greater reliance on wholesale funding increase their wholesale funding more. As a result, monetary tightening increases both the reliance on and the concentration of wholesale funding within the banking sector, indicating that monetary tightening could increase systemic risk. Our findings also suggest that introducing liquidity requirements can bolster monetary policy transmission through the bank lending channel by limiting the funding substitution of large banks.

This paper examines the bank lending channel of monetary transmission in Malaysia, a country with a dual banking system including both Islamic and conventional banks, over the period 1994:01-2015:06. A two-regime threshold vector autoregression (TVAR) model is estimated to take into account possible nonlinearities in the relationship between bank lending and monetary policy under different economic conditions. The results indicate that Islamic credit is less responsive than conventional credit to interest rate shocks in both the high and low growth regimes. By contrast, the relative importance of Islamic credit shocks in driving output growth is much greater in the low growth regime, their effects being positive. These findings can be interpreted in terms of the distinctive features of Islamic banks.

This paper uses bank-level data to investigate whether the impact of monetary policy on bank lending depends on the characteristics of Chinese banks during the period 1985-2004. We find that the impact of monetary policy on lending is weaker for large or capital-scarce banks, and that banks' responses to monetary policy do not necessarily vary according to their liquidity. Furthermore, to identify the bank lending channel more clearly, we test whether the impact of monetary policy varies according to banks' profitability. The results show that profitable banks tend to be less sensitive to monetary policy. The reason is that when tight monetary policy leads to the reduction of deposits, less profitable banks face a higher cost of capital.

El canal del crédito bancario, que amplifica los efectos del canal tradicional de la política monetaria, hace énfasis en la estructura y las fricciones del mercado financiero como determinantes del gasto agregado. Este artículo analiza y verifica la existencia del canal del crédito bancario en Colombia estimando un modelo propuesto por Michael Gibson en 19971997, quien utiliza regresiones de umbral para determinar el impacto de la política monetaria sobre la demanda agregada. Los resultados obtenidos no permiten descartar la existencia de este mecanismo de transmisión en Colombia durante el periodo analizado, aunque éste parece operar solo a través de la política monetaria contraccionista. Palabras clave: política monetaria, mecanismos de transmisión, canal de crédito bancario, modelos de umbral. Clasificación JEL: C12, C52, E44, E52, G11. Abstract: The Bank Credit Channel, which amplifies the effects of the traditional channel of monetary policy, emphasizes on the structure and frictions of financial markets as determinants of aggregate spending. This paper aims at analyze and verify the existence of the bank credit channel in Colombia estimating a model proposed by Gibson (1997) which uses threshold regressions as a way to determine the impact of monetary policy on aggregate demand. Results do not allow dismissing the existence of this transmission mechanism in Colombia during the analyzed period, although it seems to operate only through contractionary monetary policy. Keywords: monetary policy, transmission mechanisms, bank lending channel, threshold regressions. JEL classification: C12, C52, E44, E52, G11. Résumé: Le canal du crédit bancaire amplifie les effets du canal traditionnel de la politique monétaire et met l.accent sur la structure et sur les frictions du marché financier, lesquels constituent les éléments qui déterminent de la dépense agrégée. L.objectif de cet article est d.analyser et de vérifier l.existence du canal du crédit bancaire en Colombie en estimant le modèle proposé par Michael Gibson en 1997, lequel utilise des régressions à seuil pour déterminer l.impact de la politique monétaire sur la demande agrégée. Les résultats obtenus ne permettent pas d.écarter l.existence d.un mécanisme de transmission pendant la période analysée, malgré le fait qu.il ne paraisse agir qu.à travers une politique monétaire restrictive. Mots clef: politique monétaire, mécanismes de transmission, canal du crédit bancaire, modèles à seuil. Classification JEL: C12, C52, E44, E52, G11.

Islamic banks create an interest in their own right as a rising branch in financial intermediation, particularly in the post-crisis era. In addition, they also deserve the attention of students of Islamism due to their possible connection with Islamic movements. Through a comparison of Islamic and conventional banking, we analyze the motivations and behavior of Islamic economic actors who determine the cash flow to Islamic banks. Our findings suggest that, in contrast to popular views that portray these actors as ideologues or financiers of radical Islam, they have pragmatic motivations and may adapt to liberal systems in order to seize economic incentives. This study was funded by the Scientific and Technological Research Council of Turkey, project number 110K446 (Turkiye Bilimsel ve Teknolojik Arastirma Kurumu, TUBITAK). Publisher's Version

We study the role of bank capital and liquidity in the transmission of monetary policy in Switzerland. Using a large set of data, we test the assumptions that the effect of a change in the monetary policy stance on a bank's lending activity depends (i) on its capital (the bank capital channel) and (ii) on its liquidity base (the "traditional" bank lending channel). Our findings are consistent with the first hypothesis: lending by banks with a relatively weak capital base reacts more to a change in the monetary policy stance than lending by better capitalised banks. Liquidity, on the other hand, does not appear to play a role in this context. This result constitutes evidence for the existence of a bank lending channel in Switzerland.

The aim of this paper is to investigate the procyclical behavior of banks in terms of lending and loan loss provisioning, and its dynamics with regard to the adoption of the Basel II capital regulation. Using bank-level and country-level panel data spanning from 1996 to 2013 we answer this question for the OECD and BRIC countries. We find a positive effect of bank capitalization on loans growth, which, perhaps due to the recent financial crisis, weakened after 2008. Together with evidence of income smoothing and capital management we also find strong cyclical behavior of banks in terms of loan loss provisioning. At the same time, we do not find any robust changes to this behavior after the introduction of the Basel II capital regulation. We fill a gap in the empirical literature as there has been hardly any research done on changes brought forward by the adoption of the Basel II capital regulation. The results may be therefore of interest for regulators and other professionals. Moreover, we use in our analysis data for BRIC countries, which have been often neglected.

This paper examines how reserve requirements influence the transmission of monetary policy through the bank lending channel in China while also taking into account the role of bank ownership. The implementation of Chinese monetary policy is characterized by the reliance on the reserve requirements as a regular policy tool with frequent adjustments. Using a large dataset of 170 Chinese banks for the period 2004-2013, we analyze the reaction of loan supply to changes in reserve requirements. We find no evidence of the bank lending channel through the use of reserve requirements. We observe, nonetheless, that changes in reserve requirements influence loan growth of banks. The same findings hold true for other monetary policy instruments. Further, we show that the bank ownership format influences transmission of monetary policy.

We test whether quantitative easing (QE), in addition to boosting aggregate demand and inflation via portfolio rebalancing channels, operated through a bank lending channel (BLC) in the UK. Using Bank of England data together with an instrumental variables approach, we find no evidence of a traditional BLC associated with QE. We show, in a simple framework, that the traditional BLC is diminished if the bank receives ‘flighty’ deposits (deposits that are likely to quickly leave the bank). We show that QE gave rise to such flighty deposits which may explain why we find no evidence of a BLC.

YÖK Tez No: 417549 Para politikası kararlarının reel ekonomik değişkenler ve fiyat istikrarı üzerindeki etkileri parasal aktarım mekanizmaları adı verilen çeşitli kanallar üzerinden gerçekleşmektedir. Para politikalarının hangi kanallar üzerinden ne büyüklükte, ne sürede ve ne kadarlık bir gecikmeyle etkili olduğunun belirlenmesi son derece önemlidir. Para politikasının nihai hedeflere ulaşması açısından izlemiş olduğu politikaların ekonomi üzerindeki etkilerinin kantitatif yöntemlerle doğru bir şekilde belirlenmesi politika yapıcılarının karar alma sürecini desteklemektedir. Seksenli yıllardan sonra asimetrik bilgi ve diğer piyasa aksaklıklarına dayanan teorik yaklaşımların geliştirilmesi para politikalarının reel ekonomiye aktarımında kredi kanalının önemini arttırmıştır. Türkiye'de bankacılık sektörünün derinliği ve aracılık fonksiyonunun önemi banka kredileri kanalıyla aktarımın incelenmesini gerekli kılmaktadır. Bu amaçla para politikalarının bireysel kredi arzı üzerindeki etkisi 2003: 01-2013: 10 dönemini kapsayacak şekilde ARDL sınır testi ve VAR metodolojisi ile analiz edilmiştir. Analiz sonuçlarına bağlı olarak kamu, özel ve yabancı sermayeli mevduat bankalarının kredi arzlarının para politikası aracı olan borç verme faiz oranlarından uzun dönemde negatif yönde etkilendiği buna karşılık katılım bankalarında ise bu tür bir etkileşimin istatistiksel olarak anlamlı olmadığı sonucuna ulaşılmıştır. Para politikası yapıcıları açısından değerlendirildiğinde bireysel kredi kanalıyla aktarımın uygulanabilir bir politik argüman olarak belirlenebileceği görülmüştür. Anahtar Sözcükler: Bireysel Kredi, Parasal Aktarım Mekanizması, Banka Kredi Kanalı, ARDL, VAR. Monetary policy decisions' impact on real economic factors and price stability are materialized through various channels which are called monetary transmission mechanisms. It is significant to identify through which channels / to what extend / how long and late the monetary policies are effective. Measuring the impact of the policies that monetary policy follows to reach the final goals through the quantitive methods support decision making process of policymakers. After 80s, asymmetric information and development of theoric approaches based on other market defects have increased the importance of lending channel in transferring the monetary policies to real economy. The depth of banking sector in Turkey and the importance of mediation function require an investigation on the transfer through bank lending channel. With this objective, the impact of monetary policy on individual loan supply has been analyzed using ARDL bound test and VAR methodology including 2003: 01-2013: 10 term. Based on the results of the analysis, it has been concluded that loan supply of public, private and foreign capital deposit banks have been affected negatively in long term by lending interest rates that are means of credit supply, whereas, such an interaction is statistically insignificant for participation banks. As it is considered by the monetary policymakers, it has been concluded that transferring through individual credit channel is an applicable political argument.

The paper investigates transmission of different foreign and domestic shocks to bank lending activity in Bosnia and Herzegovina through the bank lending channel. The bank lending channel is analyzed in a time series cross sectional data framework for the period 2006q1-2014q1, investigating reactions of small vs. large banks to those shocks. First, the evidence has been found that both groups of banks decreased their lending activity in the aftermath of the crisis. There is some evidence that liquidity shock after the onset of the crisis is mainly transmitted through large banks that are affiliates of the large Western European banking groups. Second, strong evidence is found that loosening of domestic monetary conditions through required reserves rate change had a positive effect on lending supply, especially for small banks operating in the country.

To identify the credit channel we disentangle loan supply and demand shocks by using the answers from the confidential Euro area Bank Lending Survey and the U.S. Senior Loan Officer Survey. Embedding this information within a VAR model, we find that: (1) The credit channel of monetary policy is operational through the balancesheets of both banks and non-financial borrowers, and for business, mortgage, and consumer loans. (2) The impact of a monetary policy shock on GDP growth is higher through loan supply than through loan demand, whereas the latter affects more inflation. (3) The bank lending channel is stronger than the balance-sheet channel for firms, whereas the latter is stronger for households. (4) During the recent financial crisis, bank capital and liquidity problems had a strong negative impact on GDP growth by reducing loan supply to businesses. At the same time, the current expansionary monetary policy stance has reduced output decline in the Euro area.

Esta dissertação estuda o impacto do choque de liquidez no sistema financeiro nacional (SFN) sobre o crédito às empresas após a quebra do Lehman Brothers, em setembro/2008. O choque ocorreu de forma diferenciada aos players do mercado nacional, de modo que algumas instituições financeiras passaram por forte restrição de recursos, ao passo que outras receberam um volume acentuado de depósitos. Para expurgar possíveis efeitos de demanda por crédito, utiliza-se a abordagem de efeitos fixos por atividade econômica, de modo que os coeficientes estimados reflitam a oferta de crédito dos bancos. Os resultados obtidos corroboram, em diferentes graus, as hipóteses delineadas, com destaque para dois pontos: (i) a elasticidade do crédito empresarial aos depósitos é diferente entre os grupos de bancos que têm aumento ou diminuição desta forma de funding, fato consistente com os modelos que preveem que os agentes tendem a manter mais liquidez em um contexto de incerteza sistêmica; (ii) com a escassez de recursos externos e do mercado de capitais nacional após a quebra do Lehman Brothers, as grandes empresas tiveram que recorrer ao segmento bancário, e na disputa pelos recursos oriundos desta fonte levaram vantagem comparativa em relação às pequenas e médias empresas.

The main purpose of this article is to analyze how sovereign risk influences the loan supply reaction of banks to monetary policy through the bank lending channel. Additionally, we aim to test whether this reaction differs in easy and tight monetary regimes. Using a sample of 3,125 banks from the euro zone between 1999 and 2012, we find that sovereign risk plays an important role in determining loan supply from banks during tight monetary regimes. Banks in higher sovereign risk countries reduce lending more during tight regimes. However, we find little evidence to support any relationship between sovereign risk and loan supply reaction to monetary policy expansions. These results are very interesting for the way monetary policy is conducted in Europe. Banking union, banking system strength, and the budget control of governments would be necessary measures to reduce the heterogeneous transmission of the monetary policy in the euro zone.

We test whether quantitative easing (QE) provided a boost to bank lending in the United Kingdom, in addition to the effects on asset prices, demand and inflation focused on in most other studies. Using a data set available to researchers at the Bank, we use two alternative approaches to identify the effects of variation in deposits on individual banks' balance sheets and test whether this variation in deposits boosted lending. We find no evidence to suggest that QE operated via a traditional bank lending channel (BLC) in the spirit of the model due to Kashyap and Stein. We show in a simple BLC framework that if QE gives rise to deposits that are likely to be short-lived in a given bank (‘flighty’ deposits), then the traditional BLC is diminished. Our analysis suggests that QE operating through a portfolio rebalancing channel gave rise to such flighty deposits and that this is a potential reason that we find no evidence of a BLC. Our evidence is consistent with other studies which suggest that QE boosted aggregate demand and inflation via portfolio rebalancing channels.

Many central banks in emerging economies have used reserve requirements (RR) to alleviate the trade-off between financial stability and price stability in recent years. Notwithstanding their widespread use, transmission channels of RR have remained largely as a black-box. In this paper, we use bank-level data to explore the interaction between RR and bank lending behavior. Our empirical findings suggest that short-term borrowing from the central bank is not a close substitute for deposits for banks. Bank lending behavior responds significantly to reserve requirements and liquidity positions. Our analysis allows us to identify a new channel that we name as the "liquidity channel". The channel works through a decline in bank liquidity and loan supply due to an increase in reserve requirements.

This paper aims to discuss whether there is obstruction in the transmission mechanism and, consequently, ineffectiveness of monetary policy in Brazil post-inflation targeting system. For this, the work begins with a descriptive analysis that showed that after the adoption of inflation targeting system, there was a change in the composition of public debt and consolidation of the banking sector, which indicates that monetary policy followed a path of gain effectiveness of monetary transmission and have effective participation in this gain. Broke up, then, for empirical analysis, with the application and estimation of VAR models for the whole period (1996 to 2007) and for the inflation targeting period (2000 to 2007). The results indicate that there is a difference when taking only the inflation targeting period. It was noticed a non-negligible change in the variables behavior between the estimated models for the two periods. The results for the inflation targeting period suggest that there were gains in effectiveness of monetary policy to determine changes in output and inflation. The banks behavior indicates that there is no clear obstructions caused by them in monetary transmission., O objetivo do artigo é discutir se há obstrução no mecanismo de transmissão e, por consequência, ineficácia da política monetária no Brasil para o período posterior à implementação do regime de metas de inflação. Para isso, o trabalho inicia com uma análise descritiva que aponta que, após a adoção do regime de metas de inflação, houve mudança na composição da dívida pública e o aumento da concentração do setor bancário, o que indica que a política monetária seguiu uma trajetória de ganho de eficácia e que a transmissão monetária tenha participação efetiva nesse ganho. Partiu-se, então, para a análise empírica, com a aplicação e a estimação de modelos VAR para o período integral (1996 a 2007) e para o período de metas de inflação (2000 a 2007). Os resultados indicam que há diferença ao se tomar apenas o período de metas de inflação. Percebe-se uma mudança não desprezível no comportamento das variáveis entre os modelos estimados para os dois períodos. Os resultados para o período de metas de inflação sugerem que ocorreram ganhos de eficácia da política monetária para determinar variações no produto e na inflação. O comportamento dos bancos indica que não há obstruções claras provocadas pelos mesmos na transmissão monetária.

This paper examines how bank competition influences the bank lending channel in the Euro area countries. Using a large panel of banks from 12 euro area countries over the period 2002-2010 we analyze the reaction of loan supply to monetary policy actions depending on the degree of bank competition. We find that the effect of monetary policy on bank lending is dependent on bank competition: the transmission of monetary policy through the bank lending channel is less pronounced for banks with extensive market power. Further investigation shows that banks with less market power were more sensitive to monetary policy only before the financial crisis. These results suggest that the bank market power has a significant impact on monetary policy effectiveness. Therefore, wide variations in the level of bank market power may lead to asymmetric effects of a single monetary policy.

This paper focuses on the role the bank lending channel in transmission of monetary policy in China. Using unbalanced quarterly panel data from 2Q2000 to 4Q2011, a one-step GMM estimator is applied to establish the existence the bank lending channel. The findings suggest central bank monetary policy asymmetrically affects bank lending behavior. Small banks are found more sensitive to contractionary monetary policy in the Chinese context. Well capitalized banks appear to be more likely to adjust their lending behaviors in response to expansionary monetary policy, and conversely, undercapitalized banks tend to adjust with the advent of contractionary monetary policy. The importance of the bank lending channel declines after China introduced stricter capital regulations in early 2004, but the effect is still apparent in times of expansionary policy.

Using panel data of 68,800 small and large firms, I examine whether firms are subject to shifts in the supply of credit over the business cycle. Shifts in the supply of credit are identified by exploring how firms substitute between commitment credit -- lines of credit -- and non-commitment credit. I find that firms on average rely more on commitment credits when monetary policy is tight and when the financial health of banks is weaker. The results are consistent with a bank lending channel of monetary policy and with shifts in the supply of credit following deteriorations in banks' balance sheets.

We examine the role of bank balance sheet strength in the transmission of financial sector shocks to the real economy. Using data from the syndicated loan market, we exploit variation in banks' reliance on wholesale funding and their structural liquidity positions in 2007Q2 to estimate the impact of exposure to market freezes during 2007-08 on the supply of bank credit. We find that banks with strong balance sheets were better able to maintain lending during the crisis. In particular, banks that were ex ante more dependent on market funding and had lower structural liquidity reduced the supply of credit more than other banks. However, higher levels of better-quality capital mitigated this effect. Our results suggest that strong bank balance sheets are key for the recovery of credit following crises, and provide support for regulatory proposals under the Basel III framework.

This paper examines how bank competition influences the bank lending channel in the Euro area countries. Using a large panel of banks from 12 euro area countries over the period 2002?2010 we analyze the reaction of loan supply to monetary policy actions depending on the degree of bank competition. We find that the effect of monetary policy on bank lending is dependent on bank competition: the transmission of monetary policy through the bank lending channel is less pronounced for banks with extensive market power. Further investigation shows that banks with less market power were more sensitive to monetary policy only before the financial crisis. These results suggest that the bank market power has a significant impact on monetary policy effectiveness. Therefore, wide variations in the level of bank market power may lead to asymmetric effects of a single monetary policy.

The transmission of monetary policy, especially in light of recent events, has received increased attention, especially with respect to the efficacy of the bank lending channel. This paper summarizes the issues associated with isolating the bank lending channel and determining the extent to which it is operational. Evidence on the effectiveness of the bank lending channel is presented, both in the United States and abroad. The paper then provides observations about the likely consequences for the effectiveness of the lending channel of the changes in the financial environment associated with the recent financial crisis.

Using panel data of 68,800 small and large firms, I examine whether firms are subject to shifts in the supply of credit over the business cycle. Shifts in the supply of credit are identified by exploring how firms substitute between commitment credit - lines of credit - and non-commitment credit. I find that firms on average rely more on commitment credits when monetary policy is tight and when the financial health of banks is weaker. The results are consistent with a bank lending channel of monetary policy and with shifts in the supply of credit following deteriorations in banks' balance sheets.

This study aims to estimate the system of bank credit demand and supply in Brazil. Understanding how the balance is established in this market is the key to know the importance of the credit channel. Based on the aggregated data from June 2000 to August 2012 not only for firms but also for individuals we founded the following results. First, credit demand is pro-cyclical, reacting negatively to the unemployment and positively to GDP. Second, the price elasticity of demand for firms is higher for firms than for individuals, corroborating the fact that companies may have other sources of funding. Thirdly, it was not possible to determine the bank credit supply to individuals. This fact seems to indicate that there is no reverse causality in the personnel credit in the sense that, for this segment, the credit demand has no effect on the loan rate. Fourth, we observe the expected signs into default, the cost of funding and inflation in credit supply function in both segments. Finally, it appears that the introduction of payroll loans on personnel credit brought down the cost of the loan.

We combine existing balance sheet and stock market data with two new datasets to study whether, how much, and why bank lending to firms matters for the transmission of monetary policy. The first new dataset enables us to quantify the bank dependence of firms precisely, as the ratio of bank debt to total assets. We show that a two standard deviation increase in the bank dependence of a firm makes its stock price about 25 percent more responsive to monetary policy shocks. We explore the channels through which this effect occurs, and find that the stock prices of bank-dependent firms that borrow from financially weaker banks display a stronger sensitivity to monetary policy shocks. This finding is consistent with the bank lending channel, a theory that posits that the strength of bank balance sheets matters for monetary policy transmission. We construct a new database of hedging activities and show that the stock prices of bank-dependent firms that hedge against interest rate risk display a lower sensitivity to monetary policy shocks. This finding is consistent with an interest rate pass-through channel that operates via the direct transmission of policy rates to lending rates associated with the widespread use of floating rates in bank loans and credit line agreements.