Bank profitability and the bank lending channel: Evidence from China
This paper uses bank-level data to investigate whether the impact of monetary policy on bank lending depends on the characteristics of Chinese banks during the period 1985-2007. We find that the impact of monetary policy on lending is weaker for larger banks and banks with lower levels of liquidity, and that banks' responses to monetary policy do not necessarily vary according to their capital. Further, to identify the bank lending channel more clearly, we test whether the impact of monetary policy varies according to profitability. The results show that profitable banks tend to be less sensitive to monetary policy, because when tight monetary policy leads to a fall in deposits, less profitable banks face a higher cost of capital.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Anil K Kashyap & Jeremy C. Stein, 1994.
"The Impact of Monetary Policy on Bank Balance Sheets,"
NBER Working Papers
4821, National Bureau of Economic Research, Inc.
- Kashyap, Anil K. & Stein, Jeremy C., 1995. "The impact of monetary policy on bank balance sheets," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 42(1), pages 151-195, June.
- Allen, Franklin & Qian, Jun & Qian, Meijun, 2005.
"Law, finance, and economic growth in China,"
Journal of Financial Economics,
Elsevier, vol. 77(1), pages 57-116, July.
- Gambacorta, Leonardo, 2005. "Inside the bank lending channel," European Economic Review, Elsevier, vol. 49(7), pages 1737-1759, October.
- Alicia García-Herrero & Sergio Gavilá & Daniel Santabárbara, 2005.
"China's banking reform: An assessment of its evolution and possible impact,"
0502, Banco de España;Occasional Papers Homepage.
- Alicia García-Herrero & Sergio Gavilá & Daniel Santabárbara, 2006. "China's Banking Reform: An Assessment of its Evolution and Possible Impact," CESifo Economic Studies, CESifo, vol. 52(2), pages 304-363, June.
- Alicia Garcia-Herrero & Sergio Gavila & Daniel Santabarbara, 2005. "China’s banking reform: An assessment of its evolution and possible impact," Finance 0508010, EconWPA.
- Qin, Duo & Quising, Pilipinas & He, Xinhua & Liu, Shiguo, 2005. "Modeling monetary transmission and policy in China," Journal of Policy Modeling, Elsevier, vol. 27(2), pages 157-175, March.
- Jeremy C. Stein & Anil K. Kashyap, 2000. "What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?," American Economic Review, American Economic Association, vol. 90(3), pages 407-428, June.
- Marvin Goodfriend & Eswar Prasad, 2007.
"A Framework for Independent Monetary Policy in China,"
CESifo Economic Studies,
CESifo, vol. 53(1), pages 2-41, March.
- Marvin Goodfriend & Eswar Prasad, 2009. "A Framework for Independent Monetary Policy in China," Chapters, in: Monetary Policy Frameworks for Emerging Markets, chapter 8 Edward Elgar Publishing.
- Marvin S Goodfriend & Eswar S Prasad, 2006. "A Framework for Independent Monetary Policy in China," IMF Working Papers 06/111, International Monetary Fund.
- Yuan, Yuan, 2006. "The state of competition of the Chinese banking industry," Journal of Asian Economics, Elsevier, vol. 17(3), pages 519-534, June.
- Kishan, Ruby P & Opiela, Timothy P, 2000. "Bank Size, Bank Capital, and the Bank Lending Channel," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(1), pages 121-141, February.
- M. -H. Liu & D. Margaritis & A. Tourani-Rad, 2009. "Monetary policy and interest rate rigidity in China," Applied Financial Economics, Taylor & Francis Journals, vol. 19(8), pages 647-657.
- Yu Hsing & Wen-Jen Hsieh, 2004. "Impacts of Monetary, Fiscal and Exchange Rate Policies on Output in China: A Var Approach," Economic Change and Restructuring, Springer, vol. 37(2), pages 125-139, 06.
- Altunbas, Yener & Fazylov, Otabek & Molyneux, Philip, 2002. "Evidence on the bank lending channel in Europe," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2093-2110, November.
- Alicia Garcia Herrero & Daniel Santabarbara Garcia, 2004. "Where Is The Chinese Banking System Going With The Ongoing Reform?," Macroeconomics 0408001, EconWPA.
- Manuel Arellano & Stephen Bond, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Oxford University Press, vol. 58(2), pages 277-297.
- Tom Doan, "undated". "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Lin, Xiaochi & Zhang, Yi, 2009. "Bank ownership reform and bank performance in China," Journal of Banking & Finance, Elsevier, vol. 33(1), pages 20-29, January.
When requesting a correction, please mention this item's handle: RePEc:eee:asieco:v:21:y:2010:i:2:p:129-141. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.