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Bank lending channel in Zambia: empirical evidence from bank level data

Author

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  • Anthony Simpasa
  • Boaz Nandwa
  • Tiguéné Nabassaga

Abstract

Purpose - – The purpose of this paper is to explore the effect of monetary policy on the lending behaviour of commercial banks in Zambia using bank-level data. Design/methodology/approach - – Dynamic panel data econometric analysis is used to uncover the evidence of monetary transmission mechanism in Zambian banking industry. Other specifications are used as robustness checks. Findings - – Contrary to received evidence, the authors find that the bank lending channel in Zambia operates mainly through large banks. The effect of monetary policy on medium-sized banks is moderate while it is virtually non-existent for smaller banks. Furthermore, the data does not show evidence of relationship lending for smaller banks. Originality/value - – Overall, the findings of this investigation suggest that price signals, rather than quantity aggregates, matter the most in the transmission of monetary policy in Zambia. The results therefore lend support to the central bank’s recent shift in monetary policy framework from using monetary aggregates to interest rate targeting as a means to strengthen effectiveness of monetary policy.

Suggested Citation

  • Anthony Simpasa & Boaz Nandwa & Tiguéné Nabassaga, 2015. "Bank lending channel in Zambia: empirical evidence from bank level data," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 42(6), pages 1159-1174, November.
    • Handle: RePEc:eme:jespps:v:42:y:2015:i:6:p:1159-1174
    DOI: 10.1108/JES-10-2014-0172
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    Cited by:

    1. repec:idn:jimfjn:v:4:y:2018:i:2d:p:1-28 is not listed on IDEAS
    2. Juan Camilo Galvis Ciro & Guillermo David Hincapié Vélez, 2018. "Effect of Banking Concentration on the Lending Channel: evidence from Colombia," Economics Bulletin, AccessEcon, vol. 38(4), pages 2254-2265.
    3. Richard Adjei Dwumfour & Eric Fosu Oteng-Abayie & Emmanuel Kwasi Mensah, 2022. "Bank efficiency and the bank lending channel: new evidence," Empirical Economics, Springer, vol. 63(3), pages 1489-1542, September.
    4. Hafidh, Aula Ahmad, 2021. "Responses of Islamic banking variables to monetary policy shocks in Indonesia," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 28, pages 174-190.
    5. Chileshe, Patrick Mumbi, 2017. "Banking structure and the bank lending channel of monetary policy transmission: evidence from panel data methods," MPRA Paper 82757, University Library of Munich, Germany.

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