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How Monetary Policy Affects the Lending and Economic Activity in a Banking System with Excess Liquidity

Author

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  • Saiti Dashmir
  • Gockov Gjorgji
  • Trenovski Borce

    (Ss. Cyril’s and Methodius University, Faculty of Economy, Republic of North Macedonia)

Abstract

Research purpose. The purpose of this paper is to examine the efficiency of the transmission mechanism of the monetary policy in a banking system with excess liquidity. More specifically, it aims to examine how the interest rates of the central bank bills and inflation rate affect total lending and the overall economic activity in the country. For this purpose, the analysis is based on the case of the Republic of North Macedonia, whose banking system has exhibited excess liquidity in the past decade.

Suggested Citation

  • Saiti Dashmir & Gockov Gjorgji & Trenovski Borce, 2021. "How Monetary Policy Affects the Lending and Economic Activity in a Banking System with Excess Liquidity," Economics and Culture, Sciendo, vol. 18(2), pages 51-60, December.
    • Handle: RePEc:vrs:ecocul:v:18:y:2021:i:2:p:51-60:n:3
    DOI: 10.2478/jec-2021-0014
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    More about this item

    Keywords

    interest rates of the central bank bills; inflation; total lending; real GDP; monetary policy;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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