Transmission of Monetary Policy and Bank Heterogeneity in Colombia

Carolina Ortega Londono ()

No 16792, Documentos de Trabajo de Valor Público from Universidad EAFIT

Abstract: This study provides evidence of bank heterogeneity in Colombiafor the period 2002-2014 and analyzes how bank-specific character-istics determine the bank-lending channel for monetary policy. Toanalyze bank heterogeneity, this study estimates technical (cost) effi-ciency using Stochastic Frontier Analysis, which also allows for themeasurement of Returns to Scale and a Lerner Index to proxy mar-ket power in the loans market. This study also provides measuresof capitalization, liquidity, and the commonly used ratios of financialand operational efficiency with bank’s balance-sheet data. Further-more, using a long and unbalanced panel, this study finds evidence ofthe existence of a bank-lending channel and finds that this transmis-sion mechanism is determined by bank-specific characteristics. Theresults suggest higher technical and operational efficiency, capitaliza-tion, liquidity and market power, increase the sensitivity of loans dis-bursements to monetary policy shocks, while higher returns to scalelowers this sensitivity.

Keywords: monetary policy transmission; bank lending channel; bank heterogeneity; bank efficiency (search for similar items in EconPapers)
JEL-codes: E52 E59 G21 (search for similar items in EconPapers)
Pages: 75
Date: 2018-06-01
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eff, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:col:000122:016792

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