Size of banks as a factor which impacts the efficiency of the bank lending channel

Filip Œwita³a, Iwona Kowalska and Karolina Malajkat
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Filip Œwita³a: Faculty of Management, University of Warsaw
Iwona Kowalska: Faculty of Management, University of Warsaw
Karolina Malajkat: Collegium of Socio-Economics, Warsaw School of Economics

No 62019, Faculty of Management Working Paper Series from University of Warsaw, Faculty of Management

Abstract: In most economies banking sector plays the major role in the financial system. Therefore, it is of great importance to analyse and understand the mechanism of transmission of monetary policy and its impact on the banking sector. One of possible repercussions of changing the level of official interest rates is an ability to influence the size of bank lending, by means of the bank lending channel. The key aspect our research is a throughout understanding of functioning of the bank lending channel, with the main goal of this study being an examination of efficiency of monetary policy transmission through bank lending channel depending on the size of banks in the sector. This paper examines the abovementioned relation using annual data from 1995-2015 by 1709 commercial and cooperative banks from 27 EU countries and analyzing them in various econometric models. The results indicate that there is a positive impact of the bank's size on loan growth (defined as the bank size increases, the impact of changes in interest rates in the bank’s lending policy is getting smaller), however, interaction between the variables size and the interest rate, was proved to be insignificant (in the group of all analysed banks, as well as in commercial and cooperative banks separately).

Keywords: loan supply; capital ratio; monetary policy; bank lending channel; bank assets (search for similar items in EconPapers)
JEL-codes: E44 E51 E52 E58 G21 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2019-02
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Persistent link: https://EconPapers.repec.org/RePEc:sgm:fmuwwp:62019

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