Implications of banking marketization for the lending channel of monetary policy transmission: Evidence from China

Xiaohui Hou and Qing Wang

Journal of Macroeconomics, 2013, vol. 38, issue PB, 442-451

Abstract: This paper examines how banking marketization affects the transmission of monetary policy through the bank lending channel, and tests whether the relationship between banking marketization and the transmission of monetary policy changes across heterogeneous banks. Our results suggest that as the degree of banking marketization increases, China’s monetary policy transmission through the bank lending channel weakens, and this works particularly for large, high profitability, and high capitalization banks. To improve the effectiveness of the monetary policy, authorities need to consider reducing dependency on the lending channel of monetary policy transmission and diversifying the monetary policy instruments.

Keywords: Banking marketization; Lending channel; Monetary policy; China (search for similar items in EconPapers)
JEL-codes: E52 G21 P34 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:38:y:2013:i:pb:p:442-451

DOI: 10.1016/j.jmacro.2013.07.004

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