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Investigation the Effect of Banking Marketization in Monetary Policy Transmission through Lending Channel

Author

Listed:
  • Bahmani , Mojtaba

    (Assistant Professor, Shahid Bahonar University)

  • Mirhashemi Naeini, Siminosadat

    (Ph.D. Student in Economics, Shahid Bahonar University)

Abstract

Monetary policy transmission through changes in bank facilities is known as one of the key channels of influence of monetary policy. The strength of this channel of monetary policy transmission is highly dependent on economic conditions. The level of relying on the market mechanism in the banking industry is one of the variables that influence the transmission of monetary policy through lending channel that is called banking marketization. The aim of this paper is to analyze the hypothesis that the bank lending channel of monetary policy shocks imposed by monetary authorities is influenced by marketization in the banking system or not? To answer this question have been used two indexes for banking marketization. The ratio of the deposits of non-state-owned banks to the total deposits of all sample banks is the first index and the proportion of loans to non-state-owned enterprises in the total loans of sample banks is the second index. Also multiplication between marketization index and monetary condition index has been regarded to study the effect of increase in banking marketization on monetary policy transmission. Generalized Method of Moments or GMM method is used to estimate the model, and the data of balance sheet of 26 banks in the banking network from 2001 to 2012 has been used. The results show that as expected, with increase the degree of marketization in banking network, the banking network facilities is increased. In addition, banking marketization will weaken the transmission of monetary policy through bank lending.

Suggested Citation

  • Bahmani , Mojtaba & Mirhashemi Naeini, Siminosadat, 2015. "Investigation the Effect of Banking Marketization in Monetary Policy Transmission through Lending Channel," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 2(3), pages 119-144, December.
    • Handle: RePEc:ris:qjatoe:0022
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    Keywords

    Good Governance; Taxation; Effective Channels; Vision Plan Selected Countries;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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