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Bank Lending, Risk Taking, and the Transmission of Monetary Policy: New Evidence for Colombia

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  • Ruth Reyes Nidia

    ()

  • José Eduardo Gómez G.

    ()

  • Jair Ojeda Joya

    ()

Abstract

We study the existence of a monetary policy transmission mechanism through banks in Colombia, using monthly banks’ balance sheet data for the period 1996:4 – 2012:12. We obtain results which are consistent with the basic postulates of the bank lending channel (and the risk-taking channel) literature. The impact of short-term interest rates on the growth rate of loans is negative, indicating that increases in these rates lead to reductions in the growth rate of loans. This impact is stronger for consumer loans than for commercial loans. We find important heterogeneity in the monetary policy transmission across banks depending on banks-specific characteristics.

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Bibliographic Info

Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 772.

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Length: 19
Date of creation: Jun 2013
Date of revision:
Handle: RePEc:bdr:borrec:772

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Keywords: Monetary policy transmission; Bank lending channel; Risk taking channel; Colombia. Classification JEL: E5; E52; E59; G21.;

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  1. Raghuram G. Rajan, 2005. "Has Financial Development Made the World Riskier?," Working Papers id:248, eSocialSciences.
  2. Sean Becketti & Charles Morris, 1992. "Are bank loans still special?," Economic Review, Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, issue Q III, pages 71-84.
  3. Altunbas, Yener & Gambacorta, Leonardo & Marqués-Ibáñez, David, 2010. "Does monetary policy affect bank risk-taking?," Working Paper Series, European Central Bank 1166, European Central Bank.
  4. Gambacorta, Leonardo, 2005. "Inside the bank lending channel," European Economic Review, Elsevier, Elsevier, vol. 49(7), pages 1737-1759, October.
  5. José Gómez González & Fernando Grosz, . "Evidence of Bank Lending Channel for Argentina and Colombia," Borradores de Economia 396, Banco de la Republica de Colombia.
  6. Gómez-González, José Eduardo & Reyes, Nidia Ruth, 2011. "The number of banking relationships and the business cycle: New evidence from Colombia," Economic Systems, Elsevier, Elsevier, vol. 35(3), pages 408-418, September.
  7. Martha López & Fernando Tenjo & Héctor Zárate, 2012. "The Risk-Taking Channel in Colombia Revisited," BORRADORES DE ECONOMIA 009313, BANCO DE LA REPÚBLICA.
  8. Jayaratne, Jith & Morgan, Donald P, 2000. "Capital Market Frictions and Deposit Constraints at Banks," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 32(1), pages 74-92, February.
  9. Bernanke, Ben S & Blinder, Alan S, 1992. "The Federal Funds Rate and the Channels of Monetary Transmission," American Economic Review, American Economic Association, American Economic Association, vol. 82(4), pages 901-21, September.
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  13. Gunji, Hiroshi & Yuan, Yuan, 2010. "Bank profitability and the bank lending channel: Evidence from China," Journal of Asian Economics, Elsevier, Elsevier, vol. 21(2), pages 129-141, April.
  14. Anil K Kashyap & Jeremy C. Stein, 1997. "What Do a Million Banks Have to Say About the Transmission of Monetary Policy?," NBER Working Papers 6056, National Bureau of Economic Research, Inc.
  15. Gabriel Jiménez & Steven Ongena & José Luis Peydró & Jesús Saurina, 2009. "Hazardous times for monetary policy: What do twenty-three million bank loans say about the effects of monetary policy on credit risk-taking?," Banco de Espa�a Working Papers 0833, Banco de Espa�a.
  16. Ruby P. Kishan & Timothy P. Opiela, 2012. "Monetary Policy, Bank Lending, and the Risk‐Pricing Channel," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 44(4), pages 573-602, 06.
  17. Kishan, Ruby P. & Opiela, Timothy P., 2006. "Bank capital and loan asymmetry in the transmission of monetary policy," Journal of Banking & Finance, Elsevier, Elsevier, vol. 30(1), pages 259-285, January.
  18. Michael Ehrmann & Andreas Worms, 2004. "Bank Networks and Monetary Policy Transmission," Journal of the European Economic Association, MIT Press, MIT Press, vol. 2(6), pages 1148-1171, December.
  19. Kishan, Ruby P & Opiela, Timothy P, 2000. "Bank Size, Bank Capital, and the Bank Lending Channel," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 32(1), pages 121-41, February.
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