The role of the bank lending channel and impacts of stricter capital requirements on the Chinese banking industry
This paper focuses on the role the bank lending channel in transmission of monetary policy in China. Using unbalanced quarterly panel data from 2Q2000 to 4Q2011, a one-step GMM estimator is applied to establish the existence the bank lending channel. The findings suggest central bank monetary policy asymmetrically affects bank lending behavior. Small banks are found more sensitive to contractionary monetary policy in the Chinese context. Well capitalized banks appear to be more likely to adjust their lending behaviors in response to expansionary monetary policy, and conversely, undercapitalized banks tend to adjust with the advent of contractionary monetary policy. The importance of the bank lending channel declines after China introduced stricter capital regulations in early 2004, but the effect is still apparent in times of expansionary policy.
|Date of creation:||02 May 2013|
|Date of revision:|
|Contact details of provider:|| Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland|
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
Web page: http://www.suomenpankki.fi/bofit_en/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Misa Tanaka, 2002. "How Do Bank Capital and Capital Adequacy Regulation Affect the Monetary Transmission Mechanism?," CESifo Working Paper Series 799, CESifo Group Munich.
- Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
- R Blundell & Steven Bond, .
"Initial conditions and moment restrictions in dynamic panel data model,"
W14&104., Economics Group, Nuffield College, University of Oxford.
- Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- Al-Mashat Rania & Billmeier Andreas, 2008.
"The Monetary Transmission Mechanism in Egypt,"
Review of Middle East Economics and Finance,
De Gruyter, vol. 4(3), pages 32-82, September.
- Rania Al Mashat & Andreas Billmeier, 2008. "The Monetary Transmission Mechanism in Egypt," Working Papers 411, Economic Research Forum, revised Jun 2008.
- Rania A. Al-Mashat & Andreas Billmeier, 2007. "The Monetary Transmission Mechanism in Egypt," IMF Working Papers 07/285, International Monetary Fund.
- Ashcraft, Adam B., 2006.
"New Evidence on the Lending Channel,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 38(3), pages 751-775, April.
- Ralph Chami & Thomas F. Cosimano, 2001.
"Monetary Policy with a touch of Basel,"
IMF Working Papers
01/151, International Monetary Fund.
- Piti Disyatat, 2010.
"The bank lending channel revisited,"
BIS Working Papers
297, Bank for International Settlements.
- Jeremy C. Stein & Anil K. Kashyap, 2000. "What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?," American Economic Review, American Economic Association, vol. 90(3), pages 407-428, June.
- Dong He & Laurent Pauwels, 2008.
"What Prompts the People's Bank of China to Change its Monetary Policy Stance? Evidence from a Discrete Choice Model,"
0806, Hong Kong Monetary Authority.
- Dong He & Laurent L. Pauwels, 2008. "What Prompts the People's Bank of China to Change Its Monetary Policy Stance? Evidence from a Discrete Choice Model," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 16(6), pages 1-21.
- Gunji, Hiroshi & Yuan, Yuan, 2010. "Bank profitability and the bank lending channel: Evidence from China," Journal of Asian Economics, Elsevier, vol. 21(2), pages 129-141, April.
- Alvaro Aguiar & Ines Drumond, 2007. "Business Cycle and Bank Capital: Monetary Policy Transmission under the Basel Accords," FEP Working Papers 242, Universidade do Porto, Faculdade de Economia do Porto.
- Kishan, Ruby P. & Opiela, Timothy P., 2006. "Bank capital and loan asymmetry in the transmission of monetary policy," Journal of Banking & Finance, Elsevier, vol. 30(1), pages 259-285, January.
- Matousek, Roman & Sarantis, Nicholas, 2009. "The bank lending channel and monetary transmission in Central and Eastern European countries," Journal of Comparative Economics, Elsevier, vol. 37(2), pages 321-334, June.
- Juurikkala, Tuuli & Solanko, Laura & Karas, Alexei, 2009.
"The role of banks in monetary policy transmission: Empirical evidence from Russia,"
BOFIT Discussion Papers
8/2009, Bank of Finland, Institute for Economies in Transition.
- Tuuli Juurikkala & Alexei Karas & Laura Solanko, 2011. "The Role of Banks in Monetary Policy Transmission: Empirical Evidence from Russia," Review of International Economics, Wiley Blackwell, vol. 19(1), pages 109-121, 02.
- Rodrigo Alfaro & Helmut Franken & Carlos García & Alejandro Jara, 2003. "Bank Lending Channel and the Monetary Transmission Mechanism: the Case of Chile," Working Papers Central Bank of Chile 223, Central Bank of Chile.
- Ben S. Bernanke & Jean Boivin & Piotr Eliasz, 2005. "Measuring the Effects of Monetary Policy: A Factor-Augmented Vector Autoregressive (FAVAR) Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 120(1), pages 387-422.
- Kishan, Ruby P & Opiela, Timothy P, 2000. "Bank Size, Bank Capital, and the Bank Lending Channel," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(1), pages 121-41, February.
- Chetan Dave & Scott J. Dressler & Lei Zhang, 2009.
"The Bank Lending Channel: a FAVAR Analysis,"
Villanova School of Business Department of Economics and Statistics Working Paper Series
4, Villanova School of Business Department of Economics and Statistics.
- Jan Kakes & Jan-Egbert Sturm, 2001.
"Monetary policy and bank lending. Evidence from German banking groups,"
MEB Series (discontinued)
2001-1, Netherlands Central Bank, Monetary and Economic Policy Department.
- Kakes, Jan & Sturm, Jan-Egbert, 2002. "Monetary policy and bank lending:: Evidence from German banking groups," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2077-2092, November.
- Altunbas, Yener & Fazylov, Otabek & Molyneux, Philip, 2002. "Evidence on the bank lending channel in Europe," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2093-2110, November.
- Gambacorta, Leonardo & Mistrulli, Paolo Emilio, 2004. "Does bank capital affect lending behavior?," Journal of Financial Intermediation, Elsevier, vol. 13(4), pages 436-457, October.
When requesting a correction, please mention this item's handle: RePEc:hhs:bofitp:2013_007. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Päivi Määttä)
If references are entirely missing, you can add them using this form.