The impact of monetary policy on the performance of the commercial bank Malawi balance sheet in Southeast Africa

Shuvo Kumar Mallik

African Journal of Economic and Management Studies, 2025, vol. 17, issue 5, 709-722

Abstract: PurposeThe study investigates the influence of monetary policy on the performance of the commercial bank Malawi Balance Sheet.Design/methodology/approachThe study employed an explanatory research design using time series data obtained from financial reports of commercial banks and economic reports published by the Reserve Bank of Malawi from 2012 to 2022. Regression analyses were conducted to establish the influence of monetary policy on balance sheet performance (loan and overdraft growth). The study clearly develops hypotheses for each monetary policy tool and justifies them with references to previous studies. The shift from profitability metrics to balance sheet metrics (loans and overdrafts) adds a novel perspective to the literature.FindingsThe results suggest that the monetary policy instruments, namely, the liquidity reserve requirement (LRR), Lombard rate, policy rate, and open market operations, have insignificant influence on the loan and overdraft growth in commercial banks in Malawi.Research limitations/implicationsThe study used a single measure of the balance sheet performance of commercial banks. This study focuses on Malawi, limiting broader applicability. The regression model may oversimplify monetary dynamics, excluding fiscal policies and external shocks. A ten-year dataset may miss long-term trends in a small economy. Future research could explore external factors, alternative methods like VAR, and interactions between monetary and non-monetary influences.Originality/valueThis implies that these monetary policy tools are not the exterior determinants of the balance sheet performance of commercial banks in Malawi. The paper contains new and significant insights relevant to its scope of study, particularly the relationship between monetary policy tools and the balance sheet performance of commercial banks in Malawi. It addresses a specific gap in the literature by focusing on balance sheet metrics, such as loan and overdraft growth, rather than profitability metrics, which are more commonly examined.

Keywords: Commercial banks; Balance sheet performance; Monetary policy (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ajemsp:ajems-10-2024-0621

DOI: 10.1108/AJEMS-10-2024-0621

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