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Implications of banking marketization for the lending channel of monetary policy transmission: Evidence from China

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  • Hou, Xiaohui
  • Wang, Qing
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    Abstract

    This paper examines how banking marketization affects the transmission of monetary policy through the bank lending channel, and tests whether the relationship between banking marketization and the transmission of monetary policy changes across heterogeneous banks. Our results suggest that as the degree of banking marketization increases, China’s monetary policy transmission through the bank lending channel weakens, and this works particularly for large, high profitability, and high capitalization banks. To improve the effectiveness of the monetary policy, authorities need to consider reducing dependency on the lending channel of monetary policy transmission and diversifying the monetary policy instruments.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Macroeconomics.

    Volume (Year): 38 (2013)
    Issue (Month): PB ()
    Pages: 442-451

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    Handle: RePEc:eee:jmacro:v:38:y:2013:i:pb:p:442-451

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    Web page: http://www.elsevier.com/locate/inca/622617

    Related research

    Keywords: Banking marketization; Lending channel; Monetary policy; China;

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    References

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    Cited by:
    1. Perera, Anil & Ralston, Deborah & Wickramanayake, J., 2014. "Impact of off-balance sheet banking on the bank lending channel of monetary transmission: Evidence from South Asia," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 195-216.

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