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State-controlled Banks and the Effectiveness of Monetary Policy

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  • Randall Morck
  • M. Deniz Yavuz
  • Bernard Yeung

Abstract

We find lending by state controlled banks to be significantly more associated with monetary policy than is lending by private sector banks. At the country-level, we further find monetary policy to be significantly closely linked to aggregate loan growth and aggregate fixed capital investment growth in countries whose large banks are more predominantly state controlled. These differences are more pronounced during monetary expansions amid slow GDP growth periods. Other factors, such as small bank size and the presence of a controlling shareholder in a private sector bank also correlate with more lending sensitivity to monetary policy.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19004.

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Date of creation: Apr 2013
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Handle: RePEc:nbr:nberwo:19004

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Cited by:
  1. Wang, Yizhong & Chen, Carl R. & Huang, Ying Sophie, 2014. "Economic policy uncertainty and corporate investment: Evidence from China," Pacific-Basin Finance Journal, Elsevier, Elsevier, vol. 26(C), pages 227-243.

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