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Credit Chanel in developing countries: The case of Colombia

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  • César A. Corredor V.

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    Abstract

    This paper uses a panel data set containing monthly information from the balance sheets of 20 banks between 1995 and 2003. It follows an estimation procedure proposed by Arellano and Bondwhich applies autocorrelation into panel data using a Generalized Method of Moments (GMM) estimator. The model includes particular characteristics to determine the existence of a bank lending channelincluding: size, liquidity, capitalization and foreign capital. The bank lending channel literature argues that differences in the characteristics and initial position of banks are reflected in their ability to offset the effects of a tightening monetary policy. It has been proved thatin Colombia there is a negative response of loans to changes in the interest rate, but bigger, liquid or capitalized banks are better able to maintain the same level of loans in the face of a tightening monetary policy.Este documento usa un conjuntos de datos de panel que contiene información de los balances generales de 20 bancos comerciales colombianos entre 1995 y 2003. Basado en el proceso de estimaciónpropuesto por Arellano y Bond que aplica técnicas de autocorrelación en datos de panel a través de un estimador de Métodos de Momentos Generalizados (MMG). El modelo incluye características particulares como tamaño, liquidez, capitalización y capital extranjero para determinarla existencia del canal de préstamo bancario. La literatura del canal de préstamo bancario argumenta que diferencias en este tipo de características y la posición inicial de los bancos se reflejan en suhabilidad de compensar los efectos de una política monetaria restrictiva. Se prueba entonces que en el caso de Colombia hay una respuesta negativa del crédito a cambios en las tasas de interés, pero los bancos que poseen más activos, o que son más líquidos o más capitalizados son más capaces de mantener el mismo nivel de préstamos cuando enfrentan una restricción monetaria.

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    Bibliographic Info

    Article provided by UNIVERSIDAD DEL NORTE in its journal REVISTA DE ECONOMÍA DEL CARIBE.

    Volume (Year): (2009)
    Issue (Month): ()
    Pages:

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    Handle: RePEc:col:000382:007113

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    Related research

    Keywords: Credit channel; banking; emerging economies; panel data.Canal de crédito; sistema bancario; economías emergentes; datos de panel.;

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    1. Ricardo Caballero & Arvind Krishnamurthy, 2004. "Exchange Rate Volatility and the Credit Channel in Emerging Markets: A Vertical Perspective," NBER Working Papers 10517, National Bureau of Economic Research, Inc.
    2. Philip R. Lane & Michael B. Devereux,Juanyi Xu, 2005. "Exchange Rates and Monetary Policy in Emerging Market Economies," The Institute for International Integration Studies Discussion Paper Series iiisdp036, IIIS.
    3. Arturo Galindo & Fabio Schiantarelli, 2002. "Credit Constraints in Latin America: An Overview of the Micro Evidence," Boston College Working Papers in Economics 537, Boston College Department of Economics.
    4. de Haan, Leo, 2001. "The credit channel in the Netherlands: evidence from bank balance sheets," Working Paper Series 0098, European Central Bank.
    5. Hernando Zuleta G., . "Una Visión General del Sistema Financiero Colombiano," Borradores de Economia 071, Banco de la Republica de Colombia.
    6. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
    7. Anil K. Kashyap & Jeremy C. Stein & David W. Wilcox, 1991. "Monetary policy and credit conditions: evidence from the composition of external finance," Finance and Economics Discussion Series 154, Board of Governors of the Federal Reserve System (U.S.).
    8. Charles S. Morris & Gordon H. Sellon, Jr., 1995. "Bank lending and monetary policy: evidence on a credit channel," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 59-75.
    9. Jaffee, Dwight M & Russell, Thomas, 1976. "Imperfect Information, Uncertainty, and Credit Rationing," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 651-66, November.
    10. Charles Freedman, 1995. "The role of monetary conditions and the monetary conditions index in the conduct of policy [speech]," Bank of Canada Review, Bank of Canada, vol. 1995(Autumn), pages 53-59.
    11. Rocio Mora Quiñones, . "El ïndice de Condiciones Monetarias en Colombia," Borradores de Economia 158, Banco de la Republica de Colombia.
    12. Adolfo Barajas & Roberto Steiner, 2002. "Credit Stagnation in Latin America," IMF Working Papers 02/53, International Monetary Fund.
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