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The present study explores the effectiveness of the credit channel of monetary policy transmission in India from the perspective of magnitude, timing, and composition puzzles. To validate, further investigation of the effectiveness of the balance sheet channel and bank lending channel using the corporate cash flows and interest rate spreads, respectively, has been done. The study employs the structural vector autoregression model using the long-time quarterly series sample period from June 1998 to June 2022. The findings show that the anomalies concerning magnitude, timing, and composition effect do not exhibit a strong presence in the Indian context. The analysis of the weighted average call money rate and coverage ratio suggests a weak presence of the balance sheet channel in India with a weak negative correlation of 0.2943 (p < 0.05). The overall behavior of spread analysis also shows a weak presence of the bank lending channel in India. Although some presence of the bank lending channel is seen on banks’ managed liability side, the effect of external finance premium is not reflected in the lending rates with a correlation of 0.0577 (p > 0.05) between prime lending rate spread and weighted average call money rate spread. From the evidence, the study concludes the weak presence of the credit channel in India. Therefore, the monetary authorities might have to rely on other channels or may devise other unconventional mechanisms like Operation Twist and Long-Term Repo Operations observed during the COVID-19 pandemic to steer the real economy.

This paper analyzes empirically the existence of the credit channel of monetary policy in Mexico, that is, the relationship between changes in the target interest rate and variations in credit granted by commercial banks. The study combines aggregate information with data from the individual balance sheets of commercial banks and conducts a panel data regression analysis. The analysis is performed for total credit and its components (business, consumer, and mortgage). Additionally, by using banks' accounting information, it explores whether the transmission mechanism occurs on the supply side. It is found that there is a negative and economically significant relationship between interest rate and credit, and such a relationship is established for different types of credit. Furthermore, evidence suggests that the transmission mechanism operates on the supply side, as banks with more robust balance sheets exhibit greater resilience to changes in the interest rate. [ABSTRACT FROM AUTHOR]

The main objective of this paper is to determine the effect of bank lending channel on household consumption expenditure in Nigeria. The influence of the channel as a transmission route to household consumption has not been relatively investigated in many developing nations like Nigeria. In view of this, the aim of the study is achieved using the non-linear econometric approach such as the Generalized Method of Moments (GMM) on annual secondary data obtained from the United Nations Statistical Division Database and Central Bank of Nigeria Database. The study found that lending rates in maximum and prime are significantly affect real household consumption expenditure in Nigeria. In addition, evidence from the study suggest that growth rate of the per capita income and changes in the domestic prices of nominal output significantly affect the response variable The study discussed the implications of the study for the bank lending channel with policy recommendations. [ABSTRACT FROM AUTHOR]

Banks play a defining role in translating monetary policy shocks to pull or push‐effects in the housing market. The literature is ambiguous on the exact role of bank lending channel (BLC) in translating such effects into either moderation or acceleration of dynamics in the housing market. This paper argues that monetary policy shocks, of the same magnitude, can have asymmetric implications for a housing market via a state dependent BLC, particularly during expansion and recessionary phases of the business cycle. We test this hypothesis for the UK housing sector using a long quarterly data (1973Q1‐2015Q4) and employing Markov Switching Vector Auto Regression (MSVAR) models. Our results show that the magnitude of the bank lending channel is contingent upon the state of the economy, with a one standard deviation expansionary monetary policy shock producing a significant effect only in normal economic times. Further study on whether large cuts in policy rates could stimulate mortgage lending and whether there is impact asymmetry to dissimilar expansionary monetary policy shocks during financial crisis, we show that a sharp cut in policy rate indeed stimulates the BLC greater compared to smaller expansionary money policy shocks during recessions. [ABSTRACT FROM AUTHOR]

Copyright of Journal of Economic Policy Researches / İktisat Politikası Araştırmaları Dergisi is the property of Journal of Economic Policy Researches / Iktisat Politikasi Arastirmalari Dergisi and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper studies whether and how banks' technological innovations affect the bank lending channel of monetary policy transmission. We first provide a theoretical model in which banks' technological innovation relaxes firms' earning-based borrowing constraints and thereby enlarges the response of banks' lending to monetary policy changes. To test the empirical implications, we construct a patent-based measurement of bank-level technological innovation, which can specify the nature of technology and tell whether it is related to the bank's lending business. We find that lending-related innovations significantly strengthen the transmission of the bank lending channel. [ABSTRACT FROM AUTHOR]

This research paper aims to investigate the monetary transmission in India through bank lending channel, to know whether a change in monetary policy affects bank loans or not. A balanced panel data of 50 commercial banks covering a timeframe of 11 years from 2009 to 2020 has been undertaken for the research methodology. The outcomes of the dynamic panel have been considered by using the Generalized Method of Moment developed by Arellano Bond Blundell and Bover estimator. The result indicates that channel of bank lending has improved banks’ resilience to monetary shocks. This paper finds the significance of bank characteristics like size, liquidity, and capital which have a substantial impact on bank lending. This research study concludes that repo rate, cash reserve ratio and weighted average call rate are imperative instrument of monetary policy transmission. Banks with small size, capital, and liquidity are more sensitive to any variation in monetary policy as compared to large banks.

Objective: In this study, we investigated the existence of the bank lending channel (BLC) as one of the monetary transmission mechanisms and the effect of banking characteristics on this channel in the Iranian economy. Methods: The Factor-Augmented Vector Autoregressive (FAVAR) model, introduced by Bernanke, Boivin, and Eliasz (2005) was used. This research studied 61 macroeconomic variables from 2004Q2 to 2020Q1 and 24 banking variables from 2009Q1 to 2020Q1. Results: The investigation delivered two main results. First, by considering the growth of M2 as a proxy of monetary policy, the monetary policy proved to have a significant effect on bank lending and the BLC in the Iranian economy. When identifying monetary policy shock, the response of real lending growth was found positive and significant in the quarter when the shock was identified and also in the following three quarters. Substituting nominal lending growth for real lending growth, lending growth had a more significant response to the monetary policy shock. Also, by considering the monetary base as a proxy of monetary policy, lending growth had a less significant response to the monetary policy shock. Second, we found that bank characteristics don’t have a significant effect on the BLC. We investigated the effect of bank characteristics on the BLC at both aggregated and disaggregated lending. The results of the analysis of aggregated lending response showed that by including the bank factors, compared with the case where there are only economic factors in the model, the aggregated lending response doesn’t change significantly after considering the bank factors. Therefore, the bank characteristics do not significantly impact the response of the aggregated lending growth to the monetary policy shock. The results of the analysis of disaggregated lending response showed that except for Parsian and Pasargad banks, whose lending response to monetary policy shock is positive and insignificant, other banks give positive and significant responses to monetary policy shock. Overall, the bank characteristics have a more significant effect on the BLC in the disaggregated lending case. Conclusion: According to the achieved results, the BLC can be considered an active channel in the Iranian economy, by which the real economy can be affected. Also, the bank characteristics don’t have a significant effect on the BLC. Therefore, considering the strength of the BLC in the Iranian economy, the very close relationship between the BLC and monetary policy variable (M2), and regarding the insignificant effect of bank characteristics on the BLC, monetary policy-maker should take into account the BLC when setting monetary policy.

Copyright of Ekonomik Yaklaşim is the property of Ekonomik Yaklasim Dernegi (Ekonomik Yaklasim Association) and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The Banking Union (BU) has given rise to the distinction between two types of banks, significant banks and less significant ones. This distinction may have produced asymmetries in the transmission of monetary policy, which has not been analysed by the previous literature. This paper tries to fill this gap in the literature by analysing the differences that monetary policy changes have on the loan supply of significant and less significant banks. Our sample consists of banks from the euro area and spans 2014 to 2020. Our empirical model, which is based on the System Generalized Method of Moments (System-GMM) methodology, regress the loan supply growth of each bank on monetary policy and sovereign risk indicators, significant and less significant banks dummies, and a group of control variables. Our results show that, although the BU may have well contributed to a smoother transmission of the monetary policy through the bank lending channel, there are still differences in how monetary policy changes affect the loan supply of significant and less significant banks. The different behaviour of the bank lending channel is observed mainly in countries with low sovereign risk, where the bank lending channel is only effective reducing the loan supply of less significant banks. Our results indicate that greater banking integration is necessary in the euro area.

Purpose – The purpose of this paper is to examine monetary policies and bank lending in the emerging economies of Sub-Sahara Africa. Design/methodology/approach – The dynamic system-generalized method of moments (GMM) that overcomes issues of unobserved period and country-specific effects, as well as potential endogeneity of explanatory variables, is applied in the estimation exercise. The study uses the data for 80 banks across 20 Sub-Saharan African countries from 2010 to 2019. Findings – The findings show that expansionary monetary policy such as an increase in money supply stimulates bank lending, while contractionary monetary policies like increase in the monetary policy rates by the central banks lead to credit contraction, albeit a weak effect due to possible underdevelopment of financial markets, institutional constraints, bank concentration and other rigidities in the system characteristic of developing countries that undermine the effectiveness of monetary policy transmission. Capital adequacy ratio and size of economic activities are other variables that significantly influence bank lending channels. Practical Implication – Sub-Sahara Africa countries can enhance the effectiveness of monetary policy transmission on bank lending through the effective use of the transmission mechanism of changes in money supply and monetary policy rate. Originality/value – While greater empirical attention has been devoted to the nexus between monetary policies and macroeconomic variables in country-specific studies, the connection between monetary policies and bank lending at an extensive regional or cross-country level is still scanty. For Sub-Saharan Africa, there is a palpable lack of empirical evidence on this. This study, therefore, seeks to fill this gap in a region where the impact of monetary policies on credit intermediation is crucial to the economic diversification efforts of the governments of Sub-Sahara Africa.

This paper applied the panel VAR approach and the Impulse Response Functions to investigate the differences in the monetary transmission processes of Islamic and conventional banks using disaggregated bank-level data for Saudi Arabia over the period 2008Q1–2020Q4. Our findings show that: i) Islamic banks play a significant role in transmitting monetary policy decisions to the real economy through the balance sheet channel; ii) Islamic banks’ deposits are more responsive to oil price shocks than Islamic financing; iii) the reaction of Islamic banks to monetary policy and price shocks is relatively weaker than that of conventional banks, suggesting the existence of rigidities, such as excess liquidity, inertia in changing return rates, and the lack of funding and investment sources, and iv) the relatively significant responses of Islamic banks to various shocks make it easier for the Saudi central bank to achieve macroeconomic goals through monetary policy actions in a dual-banking system.

In this paper, we examine how a trade conflict's impact on the real economy can be amplified by financial intermediaries. After the Norwegian Nobel Peace Prize Committee awarded the 2010 Nobel Peace Prize to Chinese dissident Liu Xiaobo, China in practice banned imports of Norwegian salmon. The ban was an unexpected trade shock to the Norwegian salmon industry. Using bank balance sheet and credit register data, we trace how this trade shock affected the lending behavior of banks highly exposed to the salmon industry when the shock occurred. We find that, in the years following the trade shock, highly exposed banks cut back lending to non-salmon firms and households by 3-6 percent more than other banks. Furthermore, we find that the reduction in lending was not driven by the erosion of bank capital, but rather by the shift in expectations about the performance of loans to salmon producers, which drove highly exposed banks to increase their loan loss provisions and reduce risk-taking. [ABSTRACT FROM AUTHOR]

We test the bank lending channel of monetary policy in Africa and examine the role of bank cost efficiency in this relationship. We use the stochastic metafrontier approach to estimate cost efficiency scores of 447 commercial banks in Africa. The fixed effect (FE) estimator is used as the baseline estimation method. The 2SLS instrumental variables (IV) and two-step system GMM approaches are used as main estimation techniques to control for endogeneity. The results consistently show the existence of the bank lending channel in Africa: thus, bank credit responds to changes in monetary policy rate. Again, we find strong evidence to show that higher cost efficiency leads to higher loan growth. The results further show that cost-efficient banks are less responsive to monetary policy shocks. The evidence suggests that bank cost efficiency weakens the bank lending channel. This implies that the effect of monetary policy on bank lending depends not only on bank size, capitalization, and liquidity as espoused in the literature but also on bank efficiency. The results are robust in formal sample-splitting. Policy implications are discussed. [ABSTRACT FROM AUTHOR]

The role of bank lending in Pakistan’s economy is critical due to the scarcity of investment options like stocks and bonds. Continuous interest rate movements put extra pressure on banks to transmit the monetary policy through the credit channel. Islamic banks face an extra layer of difficulty while operating with limited open market instruments, lender of last resort facilities and tough competition with conventional banks. This paper aims to examine the co-participation of Islamic and conventional banks in monetary policy transmission and to explore factors that differentiate the lending of the two bank types. For descriptive statistics, Pearson correlation and panel data techniques for regression analysis such as the random and fixed effect regression models were considered after conforming to the Hausman specification (1978) test. The quarterly data for the ten years of 2009-2018 was analyzed to understand the impact of monetary policy changes on bank lending. This paper modeled bank financing as a dependent variable while three bank-specific variables (total assets, liquidity, and capitalization) and three macroeconomic variables (Growth, inflation, and policy rates) were used as explanatory variables. The analysis in this paper concluded that policy rate changes do not influence bank lending by Islamic banks. However, conventional bank lending is significantly affected by policy rates and growth. This paper concluded that Islamic banks have an insignificant role in policy transmission due to limited Shariah investment opportunities. Influenced by conventional monetary policy, tools and differences in operations and contracts affect the bank’s equity and liquidity which may suffer long-term participation in the economy. [ABSTRACT FROM AUTHOR]

This paper investigates the relationship between expansionary credit events and firms’ employment decisions. To overcome the endogeneity coming from the supply side of credit we exploited the legal and political framework in Mexico to examine the effects of local governments’ prepayment of loans, a situation that leads banks to channel newfound liquidity in firms. Analysis of a novel data set covering a 10-year period showed that a 1-standard-deviation increase in the issuance of new loans increases firms’ employment by 2.57 percentage points. Timing of the boost in employment varies, with smaller firms reacting immediately and larger firms reacting four months later. The effects are driven by firms in the manufacturing sector. Our results highlight the importance of the bank lending channel to stimulate employment in the short term, especially for smaller firms. Further, our estimates suggest that the effect of credit on employment could be amplified with policies that promote a more competitive corporate loan market.

Summary: Drechsler et al. (2017) present a novel reformulation of the bank lending channel of monetary transmission based on market power in local deposits markets, which they term the deposits channel. In this paper, we first perform a successful narrow replication of their key empirical results. We then revisit their results on lending in two ways. First, recent studies have pointed out the unique dynamics of credit card loans in Community Reinvestment Act loan origination data. When accounting for this heterogeneity, we find key results are sensitive to the inclusion of credit card banks that raise funds outside of local deposit markets. Second, we show that inconsistencies with related empirical studies can be explained by differences in market power measure, sample period, and the inclusion of alternative control variables. The results highlight that market power on opposing sides of bank balance sheets can impact monetary transmission through alternative channels. Overall, this paper suggests the mechanisms underlying the response of lending to monetary policy remains an important open question. [ABSTRACT FROM AUTHOR]

This article analyses how sovereign risk affects the bank lending channel of monetary policy, and tests whether these effects differed before, during, and after the onset of the financial crisis. This issue was analysed only in the eurozone during the sovereign debt crisis. However, these results are difficult to extrapolate to other countries. First, Europe is the only developed region that has experienced sovereign risk concerns. Second, it has a centralised monetary regime controlled by the European Central Bank, so it is more difficult to adapt monetary decisions to the specific level of sovereign risk in each country. To overcome these limitations, our analysis is based on two country scenarios: (1) developed countries (eurozone vs. noneurozone countries); and (2) developing countries. We find that the role of sovereign risk in the transmission of monetary policy is very complex, and its significance not only varied before, during, and after the global financial crisis, but also in developed and developing countries. [ABSTRACT FROM AUTHOR]

This paper applied the panel VAR approach and the Impulse Response Functions to investigate the differences in the monetary transmission processes of Islamic and conventional banks using disaggregated bank-level data for Saudi Arabia over the period 2008Q1–2020Q4. Our findings show that: i) Islamic banks play a significant role in transmitting monetary policy decisions to the real economy through the balance sheet channel; ii) Islamic banks' deposits are more responsive to oil price shocks than Islamic financing; iii) the reaction of Islamic banks to monetary policy and price shocks is relatively weaker than that of conventional banks, suggesting the existence of rigidities, such as excess liquidity, inertia in changing return rates, and the lack of funding and investment sources, and iv) the relatively significant responses of Islamic banks to various shocks make it easier for the Saudi central bank to achieve macroeconomic goals through monetary policy actions in a dual-banking system. [ABSTRACT FROM AUTHOR]

This paper is motivated by the ongoing debate about the Basel III impact on the efficient functioning of the banking sector. We empirically examine the effect that the implementation of the net stable funding ratio has on real economy. Using data from the EU banking sector, we conduct a retrospective analysis by simulating and investigating historically the NSFR index and its role in the implementation of a common monetary policy. We intervene on the traditional bank lending channel of Bernanke and Blinder (Am Econ Rev 82:901–921, 1992) by incorporating the interaction term between liquidity and interest rates. The analysis is conducted both at an aggregated loan supply level and by loan category while it incorporates, additionally to the interaction term, conventional asset pricing approaches with the adoption of self-financing trading strategies detecting nonlinearities in the relationship between liquidity provisions and bank lending channel. According to our findings, there is evidence of a heterogeneous response of financial intermediaries' loan supply (due to changes of interest rates) across different NSFR levels. Banks with higher NSFR respond positively to an interest rate increase, by restructuring their loans' portfolios to achieve higher risk-adjusted returns, conditional on the presence of an efficient asset allocation. On the contrary, low NSFR banks reduce loan supply as a response to higher interest rates. [ABSTRACT FROM AUTHOR]

The paper examines the bank lending channel of the monetary transmission mechanism in the Philippines. Using the dynamic panel generalized method of moments (GMM) model on quarterly individual bank data from Q1:2006 to Q4:2017, the study finds that the bank lending channel of monetary policy in the Philippines is rather weak as highly liquid banks tend to react more to monetary tightening than less liquid banks. More liquid banks would rather hold their stock of liquid assets as buffers against crises than sustain or expand their lending activity amid monetary tightening. Banks are also risk‐sensitive in their lending behavior as the increase in the cost of borrowing following tighter monetary policy could increase the likelihood of loan default. The banks' cautious lending behavior supports the policy stance of the Bangko Sentral ng Pilipinas in terms of prudent regulatory standards to maintain the resilience of the Philippine financial system. [ABSTRACT FROM AUTHOR]

The transmission mechanism of monetary policy is explained through the relationships between a change in money supply and the level of real income. Monetary policy transmits to the real sector through several different channels. Such channels include the interest rate channel, the exchange rate channel, the asset-pricing channel, the credit supply channel, and the bank balance sheet channel. This paper empirically investigates the credit supply channel of monetary policy and explores the differential impact of monetary policy on credit supply of Islamic banks in Pakistan versus Malaysia. The robust two-step System-Generalize Method of Moments (GMM) estimator is applied on an unbalanced panel dataset over the period 2005-2016. While estimating the effects of three alternative measures of monetary policy on banks’ credit supply, several bankspecific variables are included in the specification as control variables. We provide strong evidence on the existence of credit supply channel in the baseline models for both countries and differential impact of monetary policy through Islamic banks in Pakistan versus Malaysia in the extended models. Our findings suggest that there is a vital need to consider the nature of Islamic banks while devising the instruments of an effective monetary policy in countries with dual banking system like Pakistan, Malaysia, Indonesia, Bahrain, Saudi Arabia, Qatar and others.

Using bank‐level information on lending rates, we study the transmission of conventional and unconventional monetary policy measures in the euro area via shifts in the supply of credit. For conventional operations, we find that the transmission is stronger for weaker banks, in line with the standard predictions of the bank‐lending channel literature. For nonstandard measures, instead, the monetary accommodation was transmitted more by banks with stronger capital and funding positions and characterized by a higher exposure to government bonds. [ABSTRACT FROM AUTHOR]

This work examines the impact of bank efficiency on the bank lending channel in China. Using a sample of 175 Chinese banks over the period 2006-2017, we investigate how the reaction of the loan supply to monetary policy actions depends on a bank's efficiency. While bank efficiency does not exert an impact on the effectiveness of monetary policy transmission overall, it does favor the transmission of monetary policy for banks with low loan-to-deposit ratios. In addition, the expansion of shadow banking activities has been associated with a positive impact of bank efficiency on monetary policy transmission. These results suggest that bank efficiency may influence the bank lending channel in certain cases. [ABSTRACT FROM AUTHOR]

Granular residual is created in the banking network when there are a few large banks with many small banks. In this case, the effect of the shocks on each bank not lost in total that can lead to macro-economic consequences. The transmission of monetary policy through change in bank facilities is one of the key mechanisms affecting monetary policies. The power of transmission of monetary policy mechanism is highly dependent on the specific characteristics of the banking network. Thus, the importance of granular residual and considering it on transmission of monetary policy in the banking network is important. The purpose of the present study is the effect of granular residual in Iran's banking network on the transmission of monetary policy through lending channel. Indeed, the granular residual was imported in this study as a independent variable that can effect on bank facilities and lending channel. Therefore, in the present study, the balance sheet data of 32 banks from the banking network for the period 2001-2014 were used.Themodel used in this study was estimated through the Generalized Method of Moments (GMM). The results showed that in the first, according to available theories in relation to the granular residual and conducting relevant empirical analyses, the presence of granular residual in Iran's banking network is confirmed. Also as expected, granular residual has a positive and significant effect on Iran's banking network facilities and the transmission of monetary policy through lending channel is weakened by increasing the granular impacts.

This study examines comprehensively the bank-lending channel of monetary policy for Zambia using a bank-level panel data covering the period Q1 2005 to Q4 2016. Specifically, the study investigates the effects of monetary policy changes on loan supply by commercial as well as the effect of bank-specific factors on response of loan supply to monetary policy shocks. In addition, the study investigates whether the level of bank competition does affect the bank-lending channel. Using a dynamic panel data approaches developed by Arellano-Bond (1991), the results indicate that a bank-lending channel exists in Zambia. In particular, the results show that loan supply is negatively correlated with policy rate implying that following monetary policy tightening loan supply shrinks. Further, the results indicate that size, liquidity and bank-competiveness have effects on credit supply while capitalization has no effect. Specifically, the results show that bank size has negative effect on credit supply while liquidity and market power were found to enhance credit supply. Most importantly, the results showed that bank-specific factors and bank-competiveness is responsible for the asymmetrical response of banks to monetary policy. Specifically, the results showed that larger banks, banks with more market power, well-capitalized banks and liquid banks respond less to monetary policy tightening.

Copyright of Revue Economique is the property of Fondation Nationale des Sciences Politiques and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

We study how monetary policy affects the funding composition of the banking sector. When monetary tightening reduces the supply of retail deposits, banks attempt to substitute wholesale funding for deposit outflows to smooth their lending. Because of financial frictions, banks have varying degrees of access to wholesale funding. Therefore, large banks, or those with greater reliance on wholesale funding, increase their wholesale funding more. Consequently, monetary tightening increases both the reliance on and the concentration of wholesale funding within the banking sector. Our findings also suggest that liquidity requirements could bolster monetary policy transmission through the bank lending channel. This paper was accepted by Tyler Shumway, finance. [ABSTRACT FROM AUTHOR]

This study investigates how market structure affects the transmission of monetary policy through the policy's effects on the bank lending channel in the Chinese banking system. By using structural and nonstructural measures of market structure, we also examined how bank responses are affected by heterogeneity. An unbalanced panel was constructed for 122 Chinese banks using annual data from 2000 to 2014. A dynamic model using two-step system GMM gave results indicating that, for both structural and nonstructural measures, banks with greater market power and increased concentration in the market tend to weaken the monetary policy transmission via the bank lending channel. This result holds while accounting for different bank characteristics such as size, liquidity, and capitalisation. In the Chinese banking market, banks which are well capitalised and have good liquidity position are much more insulated from any shifts in monetary policy because they have alternative sources of funds and have buffers of capital to meet the bank loan supply needs. Ownership structure also plays an important role in weakening the transmission effect through the bank lending channels of joint-equity and city commercial banks. These results are shown to be robust by considering an alternative measure of monetary policy. [ABSTRACT FROM AUTHOR]

This paper attempts to investigate how changes in policy rates affect the transmission of monetary policy through the bank lending channel in India while also taking into consideration the roles played by differences in bank ownership, economic period and bank size. We specifically focus on the implementation of monetary policy through the use of the Weighted Average Call Rate (WCR) as a policy tool with frequent adjustments. Using an unbalanced panel dataset consisting of 701 observations for Indian scheduled commercial banks for the period 2000-2019, we examine the reaction of loan supply to changes in the WCR while taking into account controls such as liquidity, capitalization and size. We find that loan supply is adversely affected by a change in WCR and hence, we support the view that it is an effective monetary policy instrument. Secondly, we find that banks of all ownership types as well as sizes reduce loan supply during a contractionary policy period. Thirdly, loan supply is reduced during a rate cut in the crisis and post crisis periods. Therefore, our results support the existence of a bank lending channel in India through the use of WCR. [ABSTRACT FROM AUTHOR]

In most economies the banking sector plays the major role in the financial system. Therefore, it is of great importance to analyse and understand the mechanism of transmission of monetary policy and its impact on the banking sector. One of the possible repercussions of changing the level of official interest rates is the ability to influence the size of bank lending, by means of the bank lending channel. The key aspect our research is a thorough understanding of the functioning of the bank lending channel, with the main goal of this study being an examination of the efficiency of monetary policy transmission through the bank lending channel depending on the size of banks in the sector. This paper examines the abovementioned relation using annual data from 1995-2015 by 1709 commercial and cooperative banks from 27 EU countries and analyzing them in various econometric models. The results indicate that there is a positive impact of a bank's size on loan growth (defined as the bank size increases, the impact of changes in interest rates in the bank's lending policy is getting smaller), however, interaction between the variables of size and the interest rate, was proved to be insignificant (in the group of all analysed banks, as well as in commercial and cooperative banks separately). [ABSTRACT FROM AUTHOR]

This paper examines the impact of monetary policy on bank lending in a dual banking system, i.e. Malaysia. Making use of an unbalanced panel data set of 38 Islamic and conventional banks covering mostly 2001-2014, we find evidence that variations in monetary policy affect lending growth of Islamic banks and, to some extent, conventional banks. The results further reveal that, in conformity with studies using aggregate Islamic financing data, the Islamic financing growth reacts more strongly to monetary policy changes. Moreover, we find no marked difference between full-fledged Islamic banks and Islamic bank subsidiaries in their responses to monetary policy. While we also document some evidence indicating the significant relations between bank-specific variables and lending growth, the bank-specific variables do not seem to have any role in impacting the potency of the bank lending channel. Finally, we find that lending growth is directly related to economic growth, suggesting procyclicality of bank lending/financing in Malaysia. These results have important implications for effective implementation of monetary policy and further development of Islamic banks in Malaysia.

In March 2015, the Eurosystem launched its QE programme. The asset purchases induced a rapid and strong increase in excess reserves, implying a structural liquidity surplus in the euro area banking sector. Against this background, the first part of this paper analyses the Eurosystem's liquidity management during normal times, crisis times and times of too low inflation. With a focus on the latter, the second part of this paper develops a relatively simple theoretical model in which banks operate under a structural liquidity surplus. The model shows that increasing excess reserves have no or even a contractionary impact on bank loan supply. As the newly created excess reserves are heterogeneously distributed across euro area countries, the impact of QE on bank loan supply may differ across countries. Moreover, we derive implications for monetary policy implementation. Increases in the central bank's main refinancing rate as well as in the minimum reserve ratio and decreases in the central bank's deposit rate develop expansionary effects on loan supply – contrary to the case in which banks face a structural liquidity deficit. [ABSTRACT FROM AUTHOR]

This study investigated the role of various factors in the bank lending channel of monetary policy transmission. Using annual data (2000–2012) from the Chinese banking industry, the result of this study suggest that bank lending channel neither operates through balance sheet characteristics nor through bank risk. However, this study provides significant evidence of the lending channel operates through the market structure. The market power undermines the effect of monetary policy on bank lending. The results have important policy implications for the Chinese banking industry. Although higher competition raises concerns about financial stability, however, in this case, higher market power has a detrimental effect on bank lending channel and monetary policy transmission. Such results may argue pro-competitive policy in the Chinese banking market so that the desired objective of monetary policy can be achieved. [ABSTRACT FROM AUTHOR]

We estimate a residential mortgage bank lending channel effect on a cross-section of county-level housing markets between 2007 and 2009. The effect results primarily from distressed banks denying credit to otherwise creditworthy jumbo loan applicants. Traditional measures of bank distress are plagued with concerns about endogeneity and spurious correlation. Our innovation is to use the county-aggregated change in the jumbo to nonjumbo mortgage acceptance rate first explored by Loutskina and Strahan (2009) as an instrumental variable for bank distress. We find a statistically significant but economically small bank lending channel effect. A county with a one standard deviation decline in the instrumental variable experiences an additional 89 basis point decline in home prices and a 1.25% decrease in construction employment, which represent 7 and 6%, respectively, of their mean changes between 2007 and 2009. Most of the decline in the housing market results from the bust of the pre-crisis housing boom driven by aggressive subprime and jumbo lending. [ABSTRACT FROM AUTHOR]

This study examines the existence of a bank lending channel in the Indonesian banking system and tests whether monetary policy shock is transmitted via bank risk in bank lending activity. We use banking micro-data from 2007 to 2016. Using static and dynamic panel data, we find some contrary results from the US banking evidence, in which lessliquid banks and smaller banks and not highly liquid and larger banks are able to insulate their credit supply against the monetary shock. These types of the banks could raise funds from their business group, loyal depositors, and strong lending relationships to shield their loan portfolio from risk. Additionally, well-capitalized banks face minimal problems raising uninsured funding. Therefore, they can provide more loan supply. Moreover, riskier banks suffer more in their lending supply against monetary policy shock. Even stable banks (characterized by higher Z score) are unable to protect their capacity to channel their loans when interest rates increase. It should be suspected that larger banks convert their loanable funds into short-term investments and also focus on generating income from high-risk non-traditional bank products during the contracting period. Hence, they suffer more with their loan portfolios. This provides a signal for Financial Services Authority (OJK) to scrutiny the behavior of larger banks that might take on riskier businesses. To anticipate this activity, the banking regulator must also refine the minimum loan-to-deposit ratio for different sizes of banks so that they can increase their participation in spurring economic growth. [ABSTRACT FROM AUTHOR]

This paper examines the effectiveness of bank lending channels in ASEAN countries. The main objective of this paper is to identify whether the effectiveness of bank lending channels in ASEAN differs based on the countries' financial structure, banks' fundamentals and ownership type. The study makes use of unbalanced panel data of 214 commercial banks in nine ASEAN countries for the period from 2001 to 2015. Analysis using dynamic GMM estimators finds that the bank lending channel is more effective in CLMV countries which have a less-developed financial sector compared to ASEAN-5 countries which have a more developed financial sector. Particularly, we find that smaller banks with less liquidity have a broader scope to expand their financing portfolios when interest rates rise. We also find that foreign banks in ASEAN-5 countries and stateowned banks in ASEAN countries weaken the effect of monetary policy transmissions. However, local banks are vulnerable to changes in monetary policy. Further analyses confirm that the influence of ownership structure on credit growth is partly driven by the differences in the banks' specific characteristics. Our findings suggest that the effectiveness of bank lending channel depends on financial structure, bank fundamentals and ownership structure. The regulators need to take this into account to ensure that the changes in monetary policy achieve the desired objectives. [ABSTRACT FROM AUTHOR]