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The Bank Lending Channel of Monetary Transmission

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  • Petya Koeva Brooks
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    Abstract

    Does the bank lending channel of monetary transmission work in Turkey? Using the May- June 2006 financial turbulence as an exogenous shock that prompted a significant tightening of monetary policy, this paper examines the loan supply response of Turkey''s banks, depending on their balance sheet characteristics. The empirical results indicate that banks can play a role in Turkey''s monetary transmission mechanism. Specifically, bank liquidity is found to have a significant effect on loan supply in Turkey. This suggests that the effect of monetary policy in Turkey can be propagated by the banking sector, depending on its liquidity position.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=21488
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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/272.

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    Length: 11
    Date of creation: 01 Dec 2007
    Date of revision:
    Handle: RePEc:imf:imfwpa:07/272

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    Related research

    Keywords: Liquidity; Interest rates on loans; bank lending; monetary policy; monetary transmission; central bank; banking; banking sector; bank credit; inflation; bank loans; transmission of monetary policy; bank size; bank assets; monetary transmission mechanism; bank capital; bank loan; monetary fund; restrictive monetary policy; government securities; liquidity ratio; monetary shocks; national bank; bank balance sheets; transition economy; capital requirement; inflation-targeting; bank finance; banking system; monetary conditions; small bank; bank data; bank liquidity; banks ? balance sheets; bank risks; banks ? loan; aggregate demand; banking stability; recapitalization; capital base;

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    1. Carlo A. Favero & Francesco Giavazzi & Luca Flabbi, 1999. "The Transmission Mechanism of Monetary Policy in Europe: Evidence from Banks' Balance Sheets," NBER Working Papers 7231, National Bureau of Economic Research, Inc.
    2. Halil Ibrahim Aydin & Cafer Kaplan & Mehtap Kesriyeli & Erdal Ozmen & Cihan Yalcin & Serkan Yigit, 2006. "Corporate Sector Financial Structure in Turkey : A Descriptive Analysis," Working Papers 0607, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    3. Chmielewski, Tomasz, 2005. "Bank risks, risk preferences and lending," MPRA Paper 5131, University Library of Munich, Germany, revised 15 Jan 2006.
    4. Farinha, Luísa & Robalo Marques, Carlos, 2001. "The bank lending channel of monetary policy: identification and estimation using Portuguese micro bank data," Working Paper Series 0102, European Central Bank.
    5. Tarkan Çavusoglu, 2002. "Credit transmission mechanism in Turkey: An empirical investigation," ERC Working Papers 0203, ERC - Economic Research Center, Middle East Technical University, revised Mar 2002.
    6. Brissimis, Sophocles N. & Kamberoglou, Nicos C. & Simigiannis, George T., 2001. "Is there a bank lending channel of monetary policy in Greece? Evidence from bank level data," Working Paper Series 0104, European Central Bank.
    7. Adam B. Ashcraft, 2001. "New evidence on the lending channel," Staff Reports 136, Federal Reserve Bank of New York.
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