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Working Paper - 211 - Bank Lending Channel of Monetary Policy Transmission in Zambia: Evidence from Bank-Level Data

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Abstract

This study explores the effect of monetary policy on lending behaviour of commercial banks in Zambia. Interacting bank-specific factors with indicators of monetary policy, we find evidence of bank lending channel operating mainly through large banks. The effect of monetary policy on medium sized banks is moderate while it is virtually non-existent for smaller banks. Furthermore, price signals, rather than quantity aggregates, matter the most in the transmission of monetary policy. The results lend strong support to the central bank’s recent shift in monetary policy framework towards interest rate targeting from using monetary aggregates to strengthen effectiveness of monetary policy. Crucially, the findings suggest that the ability of monetary policy to generate large distributional effects also depends on whether or not it impacts the reserves of large sized banks.

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  • Anthony M. Simpasa & Boaz Nandwa & Tiguéné Nabassaga, 2014. "Working Paper - 211 - Bank Lending Channel of Monetary Policy Transmission in Zambia: Evidence from Bank-Level Data," Working Paper Series 2147, African Development Bank.
    • Handle: RePEc:adb:adbwps:2147
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    Cited by:

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    2. Matousek, Roman & Solomon, Helen, 2018. "Bank lending channel and monetary policy in Nigeria," Research in International Business and Finance, Elsevier, vol. 45(C), pages 467-474.
    3. Soedarmono, Wahyoe & Gunadi, Iman & Pambudi, Sudiro & Nurhayati, Tika, 2023. "Monetary policy, funding liquidity, and undisbursed loans in Indonesia: The bank lending channel revisited," Journal of Economics and Business, Elsevier, vol. 127(C).
    4. Chileshe, Patrick Mumbi, 2017. "Banking structure and the bank lending channel of monetary policy transmission: evidence from panel data methods," MPRA Paper 82757, University Library of Munich, Germany.
    5. Pham Thi Ha An & Nguyen Thi Quynh Dung, 2019. "Transfer Money Policy through Credit Channels in Vietnam," International Journal of Economics and Financial Issues, Econjournals, vol. 9(6), pages 33-39.
    6. Semu, Amanda M. & Ndanshau, Michael O.A., 2022. "Effects of Monetary Policy on Lending Behavior of Commercial Banks in Tanzania," African Journal of Economic Review, African Journal of Economic Review, vol. 10(3), June.

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