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Bank Market Power and Transmission of Monetary Policy

Author

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  • Stepan Novikov

    (Bank of Russia)

Abstract

This paper estimates bank market power in the Russian banking sector with credit and deposit markups and explores their relationship with bank size and market concentration. It then investigates how markups are related to banks' responses to monetary policy within a heterogeneous banking environment. The results suggest that higher credit markups are associated with a faster increase and a slower decrease in credit conditions when the key rate changes. In contrast, higher deposit markups correspond to a slower rise and faster decline in deposit conditions. Furthermore, banks with high deposit markups tend to maintain larger deposit volumes and exhibit stronger responses to monetary policy changes, particularly more pronounced deposit growth during periods of monetary easing in the sample period (2017-2021).

Suggested Citation

  • Stepan Novikov, 2025. "Bank Market Power and Transmission of Monetary Policy," Russian Journal of Money and Finance, Bank of Russia, vol. 84(2), pages 3-35, June.
    • Handle: RePEc:bkr:journl:v:84:y:2025:i:2:p:3-35
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    More about this item

    Keywords

    bank competition; markups; monetary policy; bank lending and deposit channel;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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