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A Theoretical and Empirical Assessment of the Bank Lending Channel and Loan Market Disequilibrium in Poland

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Listed author(s):
  • Christophe Hurlin
  • Rafal Kierzenkowski

Abstract

We study the impact of the bank lending channel and loan market disequilibrium on the efficiency of the monetary policy transmission in Poland since 1994. First, we develop a simple credit-augmented model with an interest rate control, flexible prices and an imperfect nominal wage indexation. Within this framework, we establish that the bank lending channel may amplify but also attenuate the impact of monetary policy shocks on output and prices as compared to the traditional interest rate channel. The variations in the interest rate spread between the loan rate and the central bank’s intervention rate are a good indicator when distinguishing between amplification and attenuation effects of monetary policy shocks provided that there is a positive relationship between both rates and that the loan interest rate is a market clearing variable. Second, we apply a regime switching framework to the loan market. The results suggest that disequilibrium is a permanent characteristic of the Polish loan market since 1994. Moreover, we discuss empirically the impact of any type of disequilibrium in the loan market on the effectiveness of the bank lending channel. We find attenuation effects of the bank lending channel on monetary policy shocks from the beginning of 1996 to August 1998, and on average a neutral effect of this transmission channel from September 1998 to June 2001.

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Paper provided by Narodowy Bank Polski, Economic Research Department in its series NBP Working Papers with number 22.

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Length: 36
Date of creation: 2002
Handle: RePEc:nbp:nbpmis:22
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  1. Sealey, C W, Jr, 1979. "Credit Rationing in the Commercial Loan Market: Estimates of a Structural Model under Conditions of Disequilibrium," Journal of Finance, American Finance Association, vol. 34(3), pages 689-702, June.
  2. Tomasz Lyziak, 2002. "Monetary transmission mechanism in Poland.The strenght and delays," NBP Working Papers 26, Narodowy Bank Polski, Economic Research Department.
  3. Kashyap, Anil K & Stein, Jeremy C & Wilcox, David W, 1993. "Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance," American Economic Review, American Economic Association, vol. 83(1), pages 78-98, March.
  4. Maddala, G S & Nelson, Forrest D, 1974. "Maximum Likelihood Methods for Models of Markets in Disequilibrium," Econometrica, Econometric Society, vol. 42(6), pages 1013-1030, November.
  5. Gambacorta, L., 1997. "Heterogeneous "Credit Channels: and Optimal Monetary Policy in a Monetary Union," The Warwick Economics Research Paper Series (TWERPS) 492, University of Warwick, Department of Economics.
  6. Ceyla PazarbaÅŸioÄŸlu, 1997. "A Credit Crunch? Finland in the Aftermath of the Banking Crisis," IMF Staff Papers, Palgrave Macmillan, vol. 44(3), pages 315-327, September.
  7. Bernanke, Ben S & Blinder, Alan S, 1988. "Credit, Money, and Aggregate Demand," American Economic Review, American Economic Association, vol. 78(2), pages 435-439, May.
  8. Sargent, Thomas J & Wallace, Neil, 1975. ""Rational" Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 241-254, April.
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Cited by:

  1. Balázs Égert & Ronald MacDonald, 2006. "Monetary Transmission Mechanism in Transition Economies: Surveying the Surveyable," MNB Working Papers 2006/5, Magyar Nemzeti Bank (Central Bank of Hungary).
  2. Brzoza-Brzezina, Michał & Chmielewski, Tomasz & Niedźwiedzińska, Joanna, 2007. "Substitution between domestic and foreign currency loans in Central Europe. Do central banks matter?," MPRA Paper 6759, University Library of Munich, Germany.
  3. Srdjan Kujundzic & Dragiša Otaševic, 2012. "The bank lending channel in an euroised economy: the case of Serbia," Working papers 24, National Bank of Serbia.
  4. Coricelli, Fabrizio & Égert, Balázs & MacDonald, Ronald, 2006. "Monetary transmission mechanism in Central and Eastern Europe : gliding on a wind of change," BOFIT Discussion Papers 8/2006, Bank of Finland, Institute for Economies in Transition.
  5. Luc Bauwens & Michel Lubrano, 2007. "Bayesian Inference in Dynamic Disequilibrium Models: An Application to the Polish Credit Market," Econometric Reviews, Taylor & Francis Journals, vol. 26(2-4), pages 469-486.
  6. Fabrizio Coricelli & Balázs Égert & Ronald MacDonald, 2006. "Monetary Transmission in Central and Eastern Europe: Gliding on a Wind of Change," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 44-87.
  7. Zuzanna Wosko, 2016. "Determinants of credit in the Polish banking sector before and after the GFC according to information from the NBP Senior Loan Officer Survey. Does supply or demand matter?," IFC Bulletins chapters,in: Bank for International Settlements (ed.), Combining micro and macro data for financial stability analysis, volume 41 Bank for International Settlements.
  8. Fabrizio Coricelli & Bal??zs ??gert & Ronald MacDonald, 2006. "Monetary Transmission Mechanism in Central & Eastern Europe: Gliding on a Wind of Change," William Davidson Institute Working Papers Series wp850, William Davidson Institute at the University of Michigan.

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