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Implications of banking marketization for the lending channel of monetary policy transmission: Evidence from China

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  • Hou, Xiaohui
  • Wang, Qing

Abstract

This paper examines how banking marketization affects the transmission of monetary policy through the bank lending channel, and tests whether the relationship between banking marketization and the transmission of monetary policy changes across heterogeneous banks. Our results suggest that as the degree of banking marketization increases, China’s monetary policy transmission through the bank lending channel weakens, and this works particularly for large, high profitability, and high capitalization banks. To improve the effectiveness of the monetary policy, authorities need to consider reducing dependency on the lending channel of monetary policy transmission and diversifying the monetary policy instruments.

Suggested Citation

  • Hou, Xiaohui & Wang, Qing, 2013. "Implications of banking marketization for the lending channel of monetary policy transmission: Evidence from China," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 442-451.
  • Handle: RePEc:eee:jmacro:v:38:y:2013:i:pb:p:442-451
    DOI: 10.1016/j.jmacro.2013.07.004
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    References listed on IDEAS

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    Cited by:

    1. Fungáčová, Zuzana & Nuutilainen, Riikka & Weill, Laurent, 2016. "Reserve requirements and the bank lending channel in China," Journal of Macroeconomics, Elsevier, vol. 50(C), pages 37-50.
    2. Yang, Jun & Shao, Hanhua, 2016. "Impact of bank competition on the bank lending channel of monetary transmission: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 468-481.
    3. Perera, Anil & Ralston, Deborah & Wickramanayake, J., 2014. "Impact of off-balance sheet banking on the bank lending channel of monetary transmission: Evidence from South Asia," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 195-216.
    4. Hou, Xiaohui & Wang, Qing, 2016. "Institutional quality, banking marketization, and bank stability: Evidence from China," Economic Systems, Elsevier, vol. 40(4), pages 539-551.

    More about this item

    Keywords

    Banking marketization; Lending channel; Monetary policy; China;

    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
    • P34 - Economic Systems - - Socialist Institutions and Their Transitions - - - Finance

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