Impact of bank competition on the bank lending channel of monetary transmission: Evidence from China

Jun Yang and Hanhua Shao

International Review of Economics & Finance, 2016, vol. 43, issue C, 468-481

Abstract: This paper examines how competition influences the loan supply reaction of banks to monetary policy through the bank lending channel and test whether this reaction differs in heterogeneous bank types. Based on a sample of Chinese banking micro-data over the period from 2003 to 2014, we find that increased competition in China's banking sector reduces the effectiveness of monetary policy transmission through the bank lending channel, and this impact is strongest for city-commercial banks, highly-liquid and well-capitalized banks. These results shed light on the need for the central bank to monitor the development of competition and market structure to improve the effectiveness of monetary transmission.

Keywords: Bank competition; Lerner index; Bank lending channel; Monetary policy transmission; China (search for similar items in EconPapers)
JEL-codes: E52 G21 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:43:y:2016:i:c:p:468-481

DOI: 10.1016/j.iref.2015.12.008

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