State-Run Banks, Money Growth, and the Real Economy

Randall Morck, M. Deniz Yavuz () and Bernard Yeung ()
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M. Deniz Yavuz: Krannert Graduate School of Management, Purdue University, West Lafayette, Indiana 47907-2056
Bernard Yeung: Asia Bureau of Finance and Economic Research, Singapore 117592; National University of Singapore Business School, Singapore 117592

Management Science, 2019, vol. 65, issue 12, 5914-5932

Abstract: Within countries, individual state-run banks’ lending correlates with prior money growth; similar private-sector banks’ lending does not. Aggregate credit and investment growth correlate with prior money growth more where banking systems are more state-run. Size and liquidity differences between state-run and private-sector banks do not drive these results; further tests discount broad classes of alternative explanations. Tests exploiting heterogeneity in political pressure on state-run banks associated with privatizations and elections suggest a command-and-control pseudo-monetary policy channel: changes in money growth, perhaps reflecting political pressure on the central bank, change banks’ lending constraints; political pressure actually changes state-run banks’ lending.

Keywords: state run banks; monetary policy; loan growth; capital spending; monetary stimulus; banking (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (5)

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https://doi.org/10.1287/mnsc.2018.3111 (application/pdf)

Related works:
Working Paper: State-run Banks, Money Growth, and the Real Economy (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:65:y:2019:i:12:p:5914-5932

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