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Monetary Policy Transmission in Poland: a Study of the Importance of Interest Rate and Credit Channels


  • Morten Balling


  • Ewa Wrobel
  • Tomasz Lyziak
  • Jan Przystupa


The importance of credit in the monetary transmission mechanism has recently attained a lot of attention due to a growing understanding that credit market imperfections can have an impact on the monetary policy effectiveness. In this study, using Vector Error Correction Models (VECMs) and Structural Vector Autoregressions (S-VARs), we go in-depth of the role of credit in the Polish monetary policy transmission. Papers on the role of credit in the money transmission mechanism (MTM) in Poland show that the credit channel operates. It seems however, that factors through which it affects the aggregate demand might have changed over time. The most recent study on the bank-level data suggests that the degree of bank liquidity has an impact on its efficiency: the most liquid banks do not reduce their loan supply for firms after monetary policy tightening. Previous works suggested that bank size and capital as well as variables connected with risk taking might have played a role in the credit channel operation. The results presented in this study suggest that the monetary policy impact on loan supply is, if anything, weak. One of the reasons is that Polish banks hold large amounts of highly liquid assets in their portfolios. Banks are therefore able to implement buffer-stock behaviour: in response to a tighter monetary policy, they can reduce their stocks of most liquid assets and insulate loan portfolios. To shed some light on the behaviour of the corporate sector we show how interest rate shocks affect the indebtedness of various types of firms (private, individual . i.e. small privately owned entities employing up to nine persons, state-owned). Since the balance sheet channel (one of the concepts within the broad credit channel theory) stresses the impact of monetary policy on the borrowers. balance sheets, we examine the relationship between loans and financial standing of firms. We find some support for the hypothesis that firms. balance sheets are an important factor in the loan supply function. We also analyse the reactions of various types of loans, i.e. investment, revolving and export credit, as well as real estate and securities loans to monetary policy shocks. Our results suggest that after a monetary tightening the response of investment loans differs from the response of other types of loans.

Suggested Citation

  • Ewa Wrobel & Tomasz Lyziak & Jan Przystupa, 2008. "Monetary Policy Transmission in Poland: a Study of the Importance of Interest Rate and Credit Channels," SUERF Studies, SUERF - The European Money and Finance Forum, number 2008/1 edited by Morten Balling, March.
  • Handle: RePEc:erf:erfstu:48

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    References listed on IDEAS

    1. Ramey, Valerie, 1993. "How important is the credit channel in the transmission of monetary policy?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 1-45, December.
    2. Stacey L. Schreft & Raymond E. Owens, 1991. "Survey evidence of tighter credit conditions: what does it mean?," Economic Review, Federal Reserve Bank of Richmond, issue Mar, pages 29-34.
    3. Kakes, Jan, 1998. "Monetary transmission and bank lending in the Netherlands," Research Report 98C30, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
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    5. repec:dgr:rugsom:98c30 is not listed on IDEAS
    6. Kenneth N. Kuttner & Patricia C. Mosser, 2002. "The monetary transmission mechanism: some answers and further questions," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 15-26.
    7. R. Glenn Hubbard, 1994. "Is There a `Credit Channel' for Monetary Policy?," NBER Working Papers 4977, National Bureau of Economic Research, Inc.
    8. Lyziak, Tomasz & Mackiewicz, Joanna & Stanislawska, Ewa, 2007. "Central bank transparency and credibility: The case of Poland, 1998-2004," European Journal of Political Economy, Elsevier, vol. 23(1), pages 67-87, March.
    9. Kakes, Jan & Sturm, Jan-Egbert & Philipp Maier, 1999. "Monetary transmission and bank lending in Germany," CCSO Working Papers 199906, University of Groningen, CCSO Centre for Economic Research.
    10. Jan Przystupa, 2002. "The exchange rate in the monetary transmission mechanism," NBP Working Papers 25, Narodowy Bank Polski, Economic Research Department.
    11. Hulsewig, Oliver & Mayer, Eric & Wollmershauser, Timo, 2006. "Bank loan supply and monetary policy transmission in Germany: An assessment based on matching impulse responses," Journal of Banking & Finance, Elsevier, vol. 30(10), pages 2893-2910, October.
    12. Mojon, Benoît & Peersman, Gert, 2001. "A VAR description of the effects of monetary policy in the individual countries of the euro area," Working Paper Series 0092, European Central Bank.
    13. Peersman, Gert & Smets, Frank, 2001. "The monetary transmission mechanism in the euro area: more evidence from VAR analysis," Working Paper Series 0091, European Central Bank.
    14. Łyziak, Tomasz, 2003. "Consumer inflation expectations in Poland," Working Paper Series 287, European Central Bank.
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    Cited by:

    1. Szymon Grabowski, 2009. "The Financial Indicators Leading Real Economic Activity - the Case of Poland," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 1(4), pages 311-332, December.
    2. repec:agr:journl:v:2(591):y:2014:i:2(591):p:35-66 is not listed on IDEAS
    3. Alfred A. Haug & Tomasz Jedrzejowicz & Anna Sznajderska, 2013. "Combining Monetary and Fiscal Policy in an SVAR for a Small Open Economy," Working Papers 1313, University of Otago, Department of Economics, revised Oct 2013.
    4. Daniel C. Hickman & William W. Olney, 2011. "Globalization and Investment in Human Capital," ILR Review, Cornell University, ILR School, vol. 64(4), pages 654-672, July.
    5. Senderski, Marcin, 2011. "Justifiable thrift or feverish animal spirits: What stirred the corporate credit crunch in Poland?," MPRA Paper 56613, University Library of Munich, Germany.
    6. Mishra, Prachi & Montiel, Peter, 2013. "How effective is monetary transmission in low-income countries? A survey of the empirical evidence," Economic Systems, Elsevier, vol. 37(2), pages 187-216.
    7. repec:jes:wpaper:y:2012:v:4:p:605-624 is not listed on IDEAS
    8. Mishra, Prachi & Montiel, Peter J & Spilimbergo, Antonio, 2010. "Monetary transmission in low income countries," CEPR Discussion Papers 7951, C.E.P.R. Discussion Papers.
    9. Mishra, Prachi & Montiel, Peter J & Spilimbergo, Antonio, 2011. "How Effective Is Monetary Transmission in Developing Countries? A Survey of the Empirical Evidence," CEPR Discussion Papers 8577, C.E.P.R. Discussion Papers.
    10. Grabowski, Szymon, 2008. "What does a financial system say about future economic growth?," MPRA Paper 11560, University Library of Munich, Germany.
    11. Iulian Popescu, 2012. "Effects Of Monetary Policy In Romania - A Var Approach," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 4(3a), pages 605-624, September.
    12. Popescu, Iulia Vasile, 2012. "Effects of monetary policy in Romania. A VAR approach," MPRA Paper 41686, University Library of Munich, Germany.

    More about this item


    Monetary policy transmission; credit channel; bank lending.;

    JEL classification:

    • 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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