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The role of banks in the Czech monetary policy transmission mechanism

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  • Anca Maria Pruteanu-Podpiera

Abstract

With this work, I aim to enrich the knowledge about the monetary policy transmission mechanism in the Czech Republic with empirical evidence on the impact of monetary policy on bank lending. Using a panel of quarterly time series for Czech commercial banks for the period 1996-2001, I study the overall effect of monetary policy changes on the growth rate of loans and the characteristics of the supply of loans. The characterization of the credit market's supply side allows us to make inferences on the operativeness of the credit channel (the bank lending channel and the broad credit channel) of the monetary transmission mechanism. I find that changes in monetary policy alter the growth rate of loans, with considerably stronger magnitude in the period 1999-2001 than in the period 1996-1998. From the analysis intended to capture the characteristics of the supply of loans, I conclude that the lending channel was operative in the period 1996-1998: I find cross-sectional differences in the lending reactions to monetary policy shocks due to the degree of capitalization and to liquidity. For the subsequent period 1999-2001, the results also show distributional effects of monetary policy due to bank size and its bank's proportion of classified loans. In the context of steadily decreasing interest rates, this can bolster the supposition of financial frictions between borrowers and lenders and hence, that of an operative broad credit channel. Copyright (c) 2007 The Author Journal compilation (c) 2007 The European Bank for Reconstruction and Development .

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Bibliographic Info

Article provided by The European Bank for Reconstruction and Development in its journal Economics of Transition.

Volume (Year): 15 (2007)
Issue (Month): 2 (04)
Pages: 393-428

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Handle: RePEc:bla:etrans:v:15:y:2007:i:2:p:393-428

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Cited by:
  1. Matousek, Roman & Sarantis, Nicholas, 2009. "The bank lending channel and monetary transmission in Central and Eastern European countries," Journal of Comparative Economics, Elsevier, vol. 37(2), pages 321-334, June.
  2. Horváth, Roman & Podpiera, Anca, 2012. "Heterogeneity in bank pricing policies: The Czech evidence," Economic Systems, Elsevier, vol. 36(1), pages 87-108.
  3. Jarko Fidrmuc & Roman Horváth & Eva Horváthová, 2010. "Corporate Interest Rates and the Financial Accelerator in the Czech Republic," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 46(4), pages 41-54, January.
  4. Avouyi-Dovi, Sanvi & Kierzenkowski, Rafal & Lubochinsky, Catherine, 2006. "Cycles réel et du crédit : convergence ou divergence ? Une comparaison Pologne, Hongrie, République tchèque et zone euro," Economics Papers from University Paris Dauphine 123456789/5488, Paris Dauphine University.
  5. M S Mohanty & Philip Turner, 2008. "Monetary policy transmission in emerging market economies: what is new?," BIS Papers chapters, in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 1-59 Bank for International Settlements.
  6. Ruslan Aliyev & Dana Hajkova & Ivana Kubicova, 2014. "The Impact of Monetary Policy on Financing of Czech Firms," Working Papers, Czech National Bank, Research Department 2014/05, Czech National Bank, Research Department.
  7. Fabrizio Coricelli & Balázs Égert & Ronald MacDonald, 2006. "Monetary Transmission in Central and Eastern Europe: Gliding on a Wind of Change," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 44-87.
  8. repec:onb:oenbwp:y:2006:i:1:b:1 is not listed on IDEAS
  9. Chmielewski, Tomasz, 2005. "Bank risks, risk preferences and lending," MPRA Paper 5131, University Library of Munich, Germany, revised 15 Jan 2006.
  10. Fabrizio Coricelli & Balázs Égert & Ronald MacDonald, 2006. "Monetary Transmission Mechanism in Central & Eastern Europe: Gliding on a Wind of Change," William Davidson Institute Working Papers Series wp850, William Davidson Institute at the University of Michigan.
  11. Alena Bicakova & Kamil Dybczak & Ales Krejdl & Jiri Slacalek & Michal Slavik, 2007. "CNB Economic Research Bulletin: Fiscal Policy and its Sustainability," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, Czech National Bank, Research Department, edition 2, volume 5, number rb05/2 edited by Ian Babetskii & Vladimir Bezdek, August.
  12. Amidu, Mohammed & Wolfe, Simon, 2013. "The effect of banking market structure on the lending channel: Evidence from emerging markets," Review of Financial Economics, Elsevier, Elsevier, vol. 22(4), pages 146-157.
  13. Ian Babetskii & Ales Bulir & Fabrizio Coricelli & Jan Filacek & Michal Franta & Roman Horvath & Branislav Saxa & Katerina Smidkova, 2008. "CNB Economic Research Bulletin: Ten Years of Inflation Targeting," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, Czech National Bank, Research Department, edition 1, volume 6, number rb06/1 edited by Ian Babetskii & Katerina Smidkova, August.
  14. Srdjan Kujundzic & Dragiša Otaševic, 2012. "The bank lending channel in an euroised economy: the case of Serbia," Working papers, National Bank of Serbia 24, National Bank of Serbia.
  15. Konstantins Benkovskis, 2008. "Is there a Bank Lending Channel of Monetary Policy in Latvia? Evidence from Bank Level Data," Working Papers 2008/01, Latvijas Banka.
  16. Juraj Antal & Zuzana Antonicova & Michal Hlavacek & Tomas Holub & Roman Horvath & Jaromir Hurnik & Ondrej Kamenik & Karel Musil & Lubos Ruzicka & Jal Vlcek, 2009. "CNB Economic Research Bulletin: Evaluation of the Fulfilment of the CNB's Inflation Targets 1998-2007," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, Czech National Bank, Research Department, edition 1, volume 7, number rb07/1 edited by Jan Babecky & Katerina Smidkova, August.
  17. Petrevski, Goran & Bogoev, Jane, 2012. "Interest rate pass-through in South East Europe: An empirical analysis," Economic Systems, Elsevier, vol. 36(4), pages 571-593.
  18. Balázs Égert & Ronald MacDonald, 2006. "Monetary Transmission Mechanism in Transition Economies: Surveying the Surveyable," MNB Working Papers, Magyar Nemzeti Bank (the central bank of Hungary) 2006/5, Magyar Nemzeti Bank (the central bank of Hungary).

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