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Transmission of Monetary Policy and Bank Heterogeneity in Colombia

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  • Carolina Ortega Londoño

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Abstract

This study provides evidence of bank heterogeneity in Colombiafor the period 2002-2014 and analyzes how bank-specific character-istics determine the bank-lending channel for monetary policy. Toanalyze bank heterogeneity, this study estimates technical (cost) effi-ciency using Stochastic Frontier Analysis, which also allows for themeasurement of Returns to Scale and a Lerner Index to proxy mar-ket power in the loans market. This study also provides measuresof capitalization, liquidity, and the commonly used ratios of financialand operational efficiency with bank’s balance-sheet data. Further-more, using a long and unbalanced panel, this study finds evidence ofthe existence of a bank-lending channel and finds that this transmis-sion mechanism is determined by bank-specific characteristics. Theresults suggest higher technical and operational efficiency, capitaliza-tion, liquidity and market power, increase the sensitivity of loans dis-bursements to monetary policy shocks, while higher returns to scalelowers this sensitivity.

Suggested Citation

  • Carolina Ortega Londoño, 2018. "Transmission of Monetary Policy and Bank Heterogeneity in Colombia," Documentos de Trabajo CIEF 016792, Universidad EAFIT.
  • Handle: RePEc:col:000122:016792
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    File URL: http://hdl.handle.net/10784/12966
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    More about this item

    Keywords

    monetary policy transmission; bank lending channel; bank heterogeneity; bank efficiency;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other

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