Bank Lending Channel of Monetary Policy in China: Evidence from SVAR Analysis

Jiadan Jiang ()
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Jiadan Jiang: School of Trade and Finance, Wuxi City College of Vocational Technology, No. 12, Qianou Road, Huishan District, Wuxi, Jiangsu Province 214153, P. R. China

China Economic Policy Review (CEPR), 2015, vol. 04, issue 01, 1-29

Abstract: For China where the interest rate channel is not operative, the bank lending channel plays a major role in propagating the effect of monetary policy changes. This paper conducts a formal test on the validity of bank lending channel in China with two structural vector autoregression (SVAR) models. We find that (i) monetary policy actions affect banks’ balance sheet, but there is no systematic relationship in bank portfolios typically observed in the previous literature; (ii) monetary policy changes lead to a shift in bank loan supply, which supports rather than only being consistent with the lending view.

Keywords: Bank lending; monetary policy; structural VAR; China (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1142/S1793969015500041

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