Bank lending channel in Russia: A TVP-FAVAR approach

Olga Borzykh

Applied Econometrics, 2016, vol. 43, 96-117

Abstract: Implementation of inflation targeting by the Bank of Russia depends on the effectiveness of the channels of monetary policy transmission mechanism. In this article we use a TVP-FAVAR model to examine the bank lending channel. This channel describes the connection between monetary policy impulses and the amount of bank loans that are among the main sources of investments in Russia. In order to answer the main question we analyze the connection between the amount of bank loans and the money market interest rate MIACR which is the main operational target of the Bank of Russia. The use of TVP-FAVAR model allowed to solve a problem of omitted variables and to take into account gradual changes which occurred in the Russian economy during the period from January 2004 to December 2015. It is shown that the bank lending channel works only through the group of big banks that does not include biggest state-owned banks.

Keywords: monetary policy; bank lending channel; the Russian banks; groups of banks; TVP-FAVAR approach (search for similar items in EconPapers)
JEL-codes: C11 C31 C55 E52 E58 G21 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (10)

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