The Bank Lending Channel of Monetary Policy: Does the Financial Structure of Banks Matter

Jose Gomez-Gonzalez, Ali Kutan, Jair Ojeda-Joya and María Camila Ortiz ()

Borradores de Economia from Banco de la Republica de Colombia

Abstract: This paper tests the impact of the financial structure of banks on the bank lending channel of monetary policy transmission in Colombia. Using a monthly panel of 51 commercial banks for the period 1996:4-2014:8, we find that an increase in the monetary policy interest rate significantly reduces bank loan growth. The magnitude of this effect critically depends on banks’ financial structure. Additionally, we identify an asymmetric effect depending on the monetary policy stance. The bank lending channel is stronger in times of monetary contraction than during expansions. We show that this asymmetric behavior is due to the heterogeneous response of banks with different levels of solvency to the monetary policy stance. We discuss the policy implications of our findings.

Keywords: Monetary Policy Transmission; Bank Lending Channel; Bank Financial Structure; Solvency; Heterogeneous Effects; Colombia (search for similar items in EconPapers)
JEL-codes: E5 E52 E59 G21 (search for similar items in EconPapers)
Pages: 22
Date: 2016-08
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cse, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:953

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