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Bank market power and monetary policy transmission: Evidence from loan-level data

Author

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  • Ivanova, Nadezhda
  • Popova, Svetlana
  • Styrin, Konstantin

Abstract

This paper asks the following questions. How does bank' market power reshape the transmission of monetary policy to bank lending? How does it affect loan characteristics such as the loan volume and maturity, lending interest rates, risk, and the extensive margin of lending? Is there a trade-off between financial stability and the strength of monetary transmission? We find that, for credit institutions with greater market power, monetary policy has a muted effect on fixed and floating lending interest rates, loan maturities and the extensive margin of lending at floating rates, whereas its influence on the loan volume and the extensive margin for fixed-rate loans, and risk-taking is neutral. Our current findings implying no trade-off between the strength of monetary policy transmission and financial stability are indecisive and subject to further investigation.

Suggested Citation

  • Ivanova, Nadezhda & Popova, Svetlana & Styrin, Konstantin, 2025. "Bank market power and monetary policy transmission: Evidence from loan-level data," Emerging Markets Review, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:ememar:v:66:y:2025:i:c:s1566014125000299
    DOI: 10.1016/j.ememar.2025.101280
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    References listed on IDEAS

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    1. Morais, Bernardo & Peydró, José-Luis & Roldán Peña, Jessica & Ruiz Ortega, Claudia, 2019. "The International Bank Lending Channel of Monetary Policy Rates and QE: Credit Supply, Reach-for-Yield, and Real Effects," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 74(1), pages 55-90.
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    More about this item

    Keywords

    monetary policy transmission; market concentration;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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