The role of bank capital on the bank lending channel of monetary policy transmission: An application of marginal analysis approach

Thanh Phuc Nguyen and Thi Thu Hong Dinh

Cogent Economics & Finance, 2022, vol. 10, issue 1, 2035044

Abstract: While there is a large body of research on the bank lending channel of monetary policy transmission and the distributional dependence of this transmission on bank characteristics, the asymmetric effect of bank capital on monetary policy—bank loan supply nexus has been ignored. To fill this void, the new post-estimation approach of marginal analysis based on the two-step system-GMM methodology is conducted for the dynamic panel data of Vietnamese commercial banks covering the period of 2007–2020. The results confirm the inertia related to loan growth and the presence of a monetary policy bank lending mechanism, which is robust across a series of monetary policy instruments and the approach of variable exclusion from the baseline model. In addition to previous empirical evidence on less sensitivity of well-capitalized banks to tightened monetary policy, this study shows the specific range value of bank capital that monetary policy stance has no impact on bank loan supply in a time of monetary restrictions. Furthermore, better capitalized banks could take more advantage of the expansionary monetary policy by lending more. The relevant policy recommendations for policy-makers are also provided to the best practice of monetary policy implementations considering these asymmetric effects.

Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/23322039.2022.2035044 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:oaefxx:v:10:y:2022:i:1:p:2035044

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/OAEF20

DOI: 10.1080/23322039.2022.2035044

Access Statistics for this article

Cogent Economics & Finance is currently edited by Steve Cook, Caroline Elliott, David McMillan, Duncan Watson and Xibin Zhang

More articles in Cogent Economics & Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().