What Do a Million Observations on Banks Say About the Transmission of Monetary Policy?

2000 ◽  
Vol 90 (3) ◽  
pp. 407-428 ◽  
Author(s):  
Anil K Kashyap ◽  
Jeremy C Stein
Keyword(s):  
Monetary Policy ◽  
Bank Lending ◽  
Monetary Transmission ◽  
Bank Lending Channel ◽  
Data Set ◽  
Balance Sheets ◽  
Lending Channel ◽  
The Impact ◽  
Transmission Of Monetary Policy ◽  
Quantitative Importance

We study the monetary-transmission mechanism with a data set that includes quarterly observations of every insured U.S. commercial bank from 1976 to 1993. We find that the impact of monetary policy on lending is stronger for banks with less liquid balance sheets—i.e., banks with lower ratios of securities to assets. Moreover, this pattern is largely attributable to the smaller banks, those in the bottom 95 percent of the size distribution. Our results support the existence of a “bank lending channel” of monetary transmission, though they do not allow us to make precise statements about its quantitative importance. (JEL E44, E52, G32)

scholarly journals THE BANK LENDING CHANNEL OF MONETARY POLICY TRANSMISSION IN A DUAL BANKING SYSTEM

2017 ◽  
Vol 2 (2) ◽  
pp. 193-220
Author(s):  
Mansor H. Ibrahim
Keyword(s):  
Monetary Policy ◽  
Banking System ◽  
Bank Lending ◽  
Jel Classification ◽  
Islamic Banks ◽  
Bank Lending Channel ◽  
Data Set ◽  
Lending Channel ◽  
Conventional Banks ◽  
The Impact

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.    Key words:   Bank lending channel, Monetary policy, Dual banking system, Malaysia JEL Classification: E53, G21, C23

scholarly journals Size of Banks as a Factor Which Impacts the Efficiency of the Bank Lending Channel

e-Finanse ◽  
2020 ◽  
Vol 16 (1) ◽  
pp. 36-44 ◽  
Author(s):  
Filip Świtała ◽  
Iwona Kowalska ◽  
Karolina Malajkat
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Banking Sector ◽  
Bank Lending ◽  
Annual Data ◽  
Bank Lending Channel ◽  
Lending Channel ◽  
Lending Policy ◽  
Cooperative Banks ◽  
The Impact

AbstractIn 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).

scholarly journals Effects of Bank Characteristics on Transmission of Monetary Policy Through Bank Lending Channel in Vietnam

2014 ◽  
Vol 219 ◽  
pp. 49-65
Author(s):  
CẢNH NGUYỄN PHÚC ◽  
ANH NGUYỄN QUỐC ◽  
QUÂN NGUYỄN HỒNG
Keyword(s):  
Monetary Policy ◽  
Commercial Banks ◽  
Generalized Method Of Moments ◽  
Bank Lending ◽  
Financial Statements ◽  
Equity Capital ◽  
Transmission Mechanism ◽  
Bank Lending Channel ◽  
Lending Channel ◽  
Transmission Of Monetary Policy

Credits from commercial banks influence various economic components, such as investment and consumption of durables and changes in monetary policy and therefore, affect the economy through supply of credits by commercial banks. This paper explores transmission of monetary policy through commercial bank lending channel in Vietnam in 2003-2012 by examining reaction of each bank to changes in monetary policy. Authors use the GMM (generalized method of moments) for panel data gathered from financial statements of commercial banks in 2003-2012. Results show that GMM helps detect the existence of bank lending channel in the transmission mechanism in Vietnam, and bank characteristics relating to equity capital, liquidity assets and risk degrees affect their flexibility when responding to changes in monetary policy in the surveyed period.

Real interest rate, income and bank loans: panel evidence from Egypt

2019 ◽  
Vol 12 (2) ◽  
pp. 227-243
Author(s):  
Mohamed Aseel Shokr
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Bank Lending ◽  
Bank Loans ◽  
Bank Lending Channel ◽  
Content Type ◽  
Lending Channel ◽  
Policy Shocks ◽  
Effect Of Monetary Policy ◽  
The Impact

Purpose This paper aims to examine the effectiveness of monetary policy on bank loans in Egypt using generalized method of moments (GMM) model. Also, it investigates the impact of bank level variables, namely, total assets, liquidity, capital and income on bank loans. It develops the equation of loans, which is introduced by Ehrmann et al. (2002) using bank level variables such as income and the interaction between income and interest rate. Design/methodology/approach This paper examines the impact of monetary policy shocks on bank loans in Egypt by applying the GMM technique and panel data from 1996 to 2014. Findings The results reveal that real interest rate has a significant impact on bank loans, which indicates that the bank lending channel is effective in Egypt. Furthermore, the bank level variables, namely, banks’ size, liquidity and income have significant effects on bank loans in Egypt, which sustains the heterogeneous effect of monetary policy on bank loans. Therefore, the Central Bank of Egypt (CBE) can adjust interest rate to influence the bank loans and total demand. Research limitations/implications It does not examine the effect of monetary policy on small and large banks in Egypt. Practical implications The policy implications from this paper indicate that the monetary authority in Egypt should adjust interest rate to stabilize the bank loan supply. By stabilizing the bank loans, the monetary authority is able to stabilize investment, consumption and total demand. Social implications The relevance of bank lending channel indicates that the role of commercial banks is very important in transmitting monetary policy shocks to the real sector. Originality/value It is important for the CBE, banks and people because it shows the effectiveness of bank lending channel and the effect of global financial crisis on the Egyptian economy.

scholarly journals Essays on the bank lending channel

2014 ◽  
Author(s):  
Ευφροσύνη Αλεβιζοπούλου
Keyword(s):  
Monetary Policy ◽  
Banking System ◽  
Bank Lending ◽  
European Countries ◽  
Financial Capital ◽  
Bank Lending Channel ◽  
Gmm Estimator ◽  
Additional Variable ◽  
Lending Channel ◽  
The Impact

This chapter examines two issues: First, it investigates the efficiency of the banking system in six European countries spanning the period of 1994 to 2008. The methodology used is the profit frontier methodology, following the approach suggested in Mester (1996), who indicates that financial capital should be taken into account. Furthermore total assets consist an additional variable that controls for size and is included in the model as well. Second, the chapter examines the impact of efficiency on monetary policy, through the bank lending channel, using the GMM estimator methodology suggested in Arellano and Bond (1991). The results indicate that when efficiency is explicitly included in the model, it weakens the operation of the bank lending channel.

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