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Financial development and the bank lending channel in developing countries

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  • Sanfilippo-Azofra, Sergio
  • Torre-Olmo, Begoña
  • Cantero-Saiz, María
  • López-Gutiérrez, Carlos

Abstract

This article analyses how financial development affects the bank lending channel in developing countries. Our analysis is carried out on a sample of 693 commercial banks from 31 developing countries between 2000 and 2012. We find that the loan supply of banks that operate in countries with less developed financial systems is not affected by monetary policy changes. In countries with more developed financial systems, the bank lending channel is effective, but only after the financial crisis. Moreover, in these countries, the negative effect of monetary policy contractions on bank lending is greater when financial development rises.

Suggested Citation

  • Sanfilippo-Azofra, Sergio & Torre-Olmo, Begoña & Cantero-Saiz, María & López-Gutiérrez, Carlos, 2018. "Financial development and the bank lending channel in developing countries," Journal of Macroeconomics, Elsevier, vol. 55(C), pages 215-234.
  • Handle: RePEc:eee:jmacro:v:55:y:2018:i:c:p:215-234
    DOI: 10.1016/j.jmacro.2017.10.009
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    More about this item

    Keywords

    Financial development; Banks’ loan supply; Monetary policy; Bank lending channel;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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