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Financial Development and Monetary Policy: Loan Applications, Rates, and Real Effects

Listed author(s):
  • Abuka, Charles
  • Alinda, Ronnie
  • Minoiu, Camelia
  • Peydró, José Luis
  • Presbitero, Andrea

The finance-growth literature argues that institutional constraints in developing countries impede financial intermediation and monetary policy transmission. Recent studies using aggregate data document a weak bank lending channel. For identification, we instead exploit Uganda's super- visory credit register, with loan applications and rates, and unanticipated variation in monetary policy. A monetary tightening strongly reduces credit supply - increasing loan application rejections and tightening volume and rates - especially for banks with more leverage and sovereign debt exposure (even within the same borrower-period). There are spillovers on inflation and eco- nomic activity, especially in more financially-developed areas, including on commercial building, trade, and social unrest.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 12171.

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Date of creation: Jul 2017
Handle: RePEc:cpr:ceprdp:12171
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