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The Effect of Bank Heterogeneity on the Interest Rate Channel in Lebanon

Author

Listed:
  • Ali Awdeh

    (Lebanese University, Beirut, Lebanon)

  • Zouhour Jomaa

    (American University of Beirut, Beirut, Lebanon)

  • Mohamad Kassem

    (Lebanese International University, Beirut, Lebanon)

Abstract

The effect of bank heterogeneity on the transmission of monetary policy is capturing an increasing attention, and the debate on how bank specific characteristics may determine their reaction to monetary actions is mounting. This paper participates in this flow of research by studying the reaction of 40 banks operating in Lebanon between 1994 and 2017, to a change in lending interest rate, taking into consideration: size, market power, capitalisation, credit risk, and liquidity. The empirical results show that the impact of a change in interest rate on loan supply depends on bank market power and bank liquidity only. Consequently, interest rate channel in Lebanon operates through banks with high market power and banks with high liquidity stocks.

Suggested Citation

  • Ali Awdeh & Zouhour Jomaa & Mohamad Kassem, 2020. "The Effect of Bank Heterogeneity on the Interest Rate Channel in Lebanon," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 9(1), pages 81-95.
    • Handle: RePEc:cbk:journl:v:9:y:2020:i:1:p:81-95
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    More about this item

    Keywords

    Monetary policy; Interest rate channel; Panel data econometrics.;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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