scholarly journals The Bank Lending Channel of Monetary Policy? The Panel Evidence from Egypt

2014 ◽  
Vol 16 (3) ◽  
pp. 255 ◽  
Author(s):  
Mohamed Aseel Shokr ◽  
Zulkefly Abdul Karim ◽  
Mansor Jusoh ◽  
Mohd. Azlan Shah Shah Zaidi
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Empirical Studies ◽  
Bank Lending ◽  
Bank Loans ◽  
Bank Loan ◽  
Bank Lending Channel ◽  
Lending Channel ◽  
Level Data ◽  
Effect Of Monetary Policy

This paper examines the relevance of the bank lending channel of monetary policy in Egypt using bank-level data. Previous empirical studies in Egypt that used macro-level data have not supported the relevance of the bank lending channel. However, using a sample of 32 commercial banks for the period from 1998 until 2011 and a dynamic panel GMM technique, the empirical findings revealed the relevance of the bank lending channel of monetary policy in Egypt. Moreover, there is a heterogeneity effect of monetary policy on bank loans according to bank size, in which the small banks are more affected during a monetary contraction than larger banks. This finding signals that the monetary authorities in Egypt should take cognizance of the stability of interest rates in order to stabilize the bank loan supply.       

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.

Bank lending channel in Zambia: empirical evidence from bank level data

2015 ◽  
Vol 42 (6) ◽  
pp. 1159-1174 ◽  
Author(s):  
Anthony Simpasa ◽  
Boaz Nandwa ◽  
Tiguéné Nabassaga
Keyword(s):  
Monetary Policy ◽  
Bank Lending ◽  
Dynamic Panel Data ◽  
Policy Framework ◽  
Relationship Lending ◽  
Bank Lending Channel ◽  
Content Type ◽  
Lending Channel ◽  
Level Data ◽  
Effect Of Monetary Policy

Purpose – The purpose of this paper is to explore the effect of monetary policy on the lending behaviour of commercial banks in Zambia using bank-level data. Design/methodology/approach – Dynamic panel data econometric analysis is used to uncover the evidence of monetary transmission mechanism in Zambian banking industry. Other specifications are used as robustness checks. Findings – Contrary to received evidence, the authors find that the bank lending channel in Zambia operates mainly through large banks. The effect of monetary policy on medium-sized banks is moderate while it is virtually non-existent for smaller banks. Furthermore, the data does not show evidence of relationship lending for smaller banks. Originality/value – Overall, the findings of this investigation suggest that price signals, rather than quantity aggregates, matter the most in the transmission of monetary policy in Zambia. The results therefore lend support to the central bank’s recent shift in monetary policy framework from using monetary aggregates to interest rate targeting as a means to strengthen effectiveness of monetary policy.

Bank lending channel and banking sector efficiency: panel data of Egypt

2018 ◽  
Vol 13 (5) ◽  
pp. 1291-1310 ◽  
Author(s):  
Mohamed Aseel Shokr ◽  
Anwar Al-Gasaymeh
Keyword(s):  
Monetary Policy ◽  
Panel Data ◽  
Banking Sector ◽  
Generalized Method Of Moments ◽  
Bank Lending ◽  
Bank Loan ◽  
Bank Lending Channel ◽  
Bank Efficiency ◽  
Content Type ◽  
Lending Channel

Purpose The purpose of this paper is to examine the relevance of the bank lending channel (BLC) of monetary policy and the bank efficiency in Egypt. Design/methodology/approach This paper examines the effectiveness of bank lending channel using generalized method of moments GMM model during the period from 1996 to 2014. Also, it uses stochastic frontier approach (SFA) to examine the bank efficiency in Egypt. Findings This study supports the relevance of the BLC using panel data. Moreover, applying SFA, this paper computes cost efficiency taking account of both time and country effects directly. The finding suggests that banks with low inflation and high GDP tend to perform more efficiently. Research limitations/implications The limitation of the study is examining one country only. Practical implications The finding signals that the Central Bank of Egypt (CBE) should adjust interest rate in order to stabilize the bank loan supply. Social implications It is important for the CBE and Egyptian banks because it highlights the importance of BLC. Originality/value It examines one channel of monetary policy and bank efficiency in Egypt.

The roles of domestic and foreign Islamic banks in Malaysian monetary transmission

2014 ◽  
Vol 7 (2) ◽  
pp. 161-169 ◽  
Author(s):  
Fidlizan Muhammad ◽  
Asmak Ab Rahman ◽  
Ahmad Azam Sulaiman
Keyword(s):  
Monetary Policy ◽  
Banking System ◽  
Bank Lending ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Bank Lending Channel ◽  
Content Type ◽  
Lending Channel ◽  
Level Data ◽  
Loan Supply

Purpose – The aim of this paper is to empirically test the presence of the bank lending channel for the Islamic banking system in Malaysia. Design/methodology/approach – Distributional effects from monetary policy changes were analyzed by three bank characteristics such as size, liquidity and capital. Using the econometric model by Kashyap and Stein (1995), the implementation of a policy contraction leads to reduction in loan supply because some banks may not able to offset a reduction in deposits. The paper explores the response shown between domestic and foreign Islamic banks in Malaysia using bank-level data from 2005 to 2010. Findings – The empirical result indicates presence of the bank lending channel in the Islamic banking system in Malaysia, size and liquidity as sources of difference response of financing supply in domestic bank and capital for foreign Islamic bank and Islamic interbank rate as an efficient tool in conducting monetary policy especially in the Islamic banking system. Originality/value – The paper manages to explore the effectiveness of Islamic the monetary policy tools in the Islamic Banking system in Malaysia. Using Islamic interbank rate as a policy tool, it provides valuable view to policy makers, who are analyzing for efficiency of transmission channel.

scholarly journals Monetary Policy, Development of Financial Market and Banking Lending : An Analysis of the Bank-Lending Channel in Malaysia

2020 ◽  
Author(s):  
Noor A. Ghazali ◽  
Aisyah A. Rahman
Keyword(s):  
Monetary Policy ◽  
Financial Market ◽  
Bank Lending ◽  
Monetary Authority ◽  
Credit Channel ◽  
Direct Influence ◽  
Economic Activities ◽  
Bank Lending Channel ◽  
Lending Channel ◽  
Effect Of Monetary Policy

Recent resurgence of interest in understanding the transmission mechanism of monetary policy focuses on two main channels of explanation, i.e. the money and credit channel. This paper investigates a version of the credit channel, i.e. the bank-lending channel for the Malaysian economy. The bank-lending channel assigns a critical role for the supply of bank loans in transmitting the effect of monetary policy on real economic activities. The study analyzes the effect of monetary policy on the ability and willingness of Malaysian banks to issue loans with respect to the development in the open financial market. Specifically it argues on the changes of the pattern of influence as progress in the open financial market takes place. A multivariate system analysis of vector auto regression (VAR) is used. The results show that prior to the progress in open financial market, the monetary authority has a direct influence on supply of loans of banks. However, this direct influence lessens as the open financial market develops. Loans are more affected by interest rates spread that dictates conditions in open financial markets. Thus, the ability of the monetary authority to steer real economic activities is subjected to development in the financial market.

scholarly journals The internationalization of domestic banks and the credit channel of monetary policy

2021 ◽  
Author(s):  
Paola Morales ◽  
Daniel Osorio-Rodíguez ◽  
Juan S. Lemus-Esquivel ◽  
Miguel Sarmiento
Keyword(s):  
Monetary Policy ◽  
Risk Taking ◽  
Bank Lending ◽  
Policy Changes ◽  
Bank Lending Channel ◽  
Lending Channel ◽  
Level Data ◽  
International Banks ◽  
Domestic Banks ◽  
Loan Growth

How does the expansion of domestic banks in international markets affect the bank lending channel of monetary policy? Using bank-firm loan-level data, we find that loan growth and loan rates from international banks respond less to monetary policy changes than domestic banks and that internationalization partially mitigates the risk-taking channel of monetary policy. Banks with a large international presence tend to tolerate more their credit risk exposition relative to domestic banks. Moreover, international banks tend to rely more on foreign funding when policy rates change, allowing them to insulate better the monetary policy changes from their credit supply than domestic banks. This result is consistent with the predictions of the internal capital markets hypothesis. We also show that macroprudential FX regulation reduces banks with high FX exposition access to foreign funding, ultimately contributing to monetary policy transmission. Overall, our results suggest that the internationalization of banks lowers the potency of the bank lending channel. Furthermore, it diminishes the risk-taking channel of monetary policy within the limit established by macroprudential FX regulations.

scholarly journals FINANCIAL DEREGULATION AND THE BANK LENDING CHANNEL IN DEVELOPING COUNTRIES: THE CASE OF INDONESIA

2003 ◽  
Vol 3 (1) ◽  
pp. 121-145
Author(s):  
Juda Agung
Keyword(s):  
Developing Countries ◽  
Monetary Policy ◽  
Dominant Role ◽  
Balance Sheet ◽  
Bank Lending ◽  
Bank Loan ◽  
Bank Lending Channel ◽  
Asymmetry Of Information ◽  
Lending Channel ◽  
The Government

The dominant role of commercial banks as a source of finance and the considerable asymmetry of information in financial markets in developing countries have raised an argument that the bank lending channel of monetary transmission mechanism would be very important in such countries. This study addresses the issue by investigating empirically whether there are differential effects of monetary policy on banks’ balance sheets, and its implications to the existence of the bank lending channel of monetary policy in Indonesia, especially since the early 1980s when the government adopted a policy of financial deveculation. We find significant differences of balance sheet behavior across bank clashes in response to a change in monetary policy, consistent with the predictions of the bank lending view. We also found that because of access to foreign funds and the existence of bank loan commitment, the monetary policy was unable to constrain loan supply by the large (state) banks, indicating that the bank lending channel operates through smaller (non-state) banks.

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).

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