Effect of Banking Concentration on Monetary Policy Transmission Mechanism in Cameroon

Marcel Takoulac Kamta (), Desire Avom (), Luc Nembot Ndeffo () and Eric Mouchili Moumie ()

Asian Journal of Economic Modelling, 2020, vol. 8, issue 2, 89-95

Abstract: The aim of this paper is to evaluate the effect of banking concentration on the monetary policy transmission mechanism in Cameroon. To conduct our study, we focus our attention on the bank lending channel. Using bank-level data of 6 commercial banks from 2006-2016 collected from National Credit Council, we estimate our model using the Dynamic Ordinary Least Square (DOLS) method. We find that, banking channel exist in Cameroon. Moreover, it appears that banking concentration weakens bank lending channel of monetary policy transmission in Cameroon. But, its impact is not significant. It also appears that banking concentration negatively and significantly affect credit supply in Cameroon. Therefore, we recommend to the Central Bank authority to reduce the amount of regulatory capital to a reasonable level in order to facilitate the entry of new banks into the sector. This should ultimately lead to the migration of concentrated structure to competitive structure more able to convey monetary policy decisions.

Keywords: Banking concentration; BEAC; CEMAC; DOLS; Lending channel; Monetary policy. (search for similar items in EconPapers)
Date: 2020
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