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The bank lending channel in an euroised economy: the case of Serbia

  • Srdjan Kujundzic

    (National Bank of Serbia)

  • Dragiša Otaševic

    (National Bank of Serbia)

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    This paper investigates the bank lending channel of monetary transmission in Serbia. We collect individual bank balance sheet data for 33 banks over the period 2008Q3-2011Q2 and employ dynamic panel estimation techniques. Two different bank loan supply functions are investigated according to the currency denomination of bank loans in Serbia. Our findings indicate that there is a significant bank lending channel through the domestic and foreign reference interest rates in the growth of domestic currency loans. In the case of foreign currency loans, there is no statistical evidence for the existence of a bank lending channel which may be related to the prevalence of long-term loans in total foreign currency loans and relatively short sample size.

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    Paper provided by National Bank of Serbia in its series Working papers with number 24.

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    Length: 23 pages
    Date of creation: Jul 2012
    Date of revision:
    Handle: RePEc:nsb:wpaper:24
    Contact details of provider: Postal: National Bank of Serbia, 12 Kralja Petra St, 11 000 Belgrade, Republic of Serbia
    Phone: 381-11/3248-841
    Fax: 381-11/3234-120
    Web page: http://www.nbs.rs
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    3. 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.
    4. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc.
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    6. Sevestre, Patrick & Martinez-Pages, Jorge & Gambacorta, Leonardo & Ehrmann, Michael & Worms, Andreas, 2001. "Financial systems and the role of banks in monetary policy transmission in the euro area," Discussion Paper Series 1: Economic Studies 2001,18, Deutsche Bundesbank, Research Centre.
    7. Eduardo Levy-Yeyati, 2004. "FINANCIAL DOLLARIZATION: Evaluating the consequences," Econometric Society 2004 Latin American Meetings 184, Econometric Society.
    8. Jimborean, Ramona, 2009. "The role of banks in the monetary policy transmission in the new EU member states," Economic Systems, Elsevier, vol. 33(4), pages 360-375, December.
    9. Reinhart, Carmen & Calvo, Guillermo, 2002. "Fear of floating," MPRA Paper 14000, University Library of Munich, Germany.
    10. Anca Maria Pruteanu-Podpiera, 2007. "The role of banks in the Czech monetary policy transmission mechanism," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 15(2), pages 393-428, 04.
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    16. Brzoza-Brzezina, Michał & Chmielewski, Tomasz & Niedźwiedzińska, Joanna, 2010. "Substitution between domestic and foreign currency loans in Central Europe. Do central banks matter?," Working Paper Series 1187, European Central Bank.
    17. Sarafidis, Vasilis & Yamagata, Takashi & Robertson, Donald, 2009. "A test of cross section dependence for a linear dynamic panel model with regressors," Journal of Econometrics, Elsevier, vol. 148(2), pages 149-161, February.
    18. Balázs Égert & Ronald MacDonald, 2008. "Monetary Transmission Mechanism in Central and Eastern Europe: Surveying the Surveyable," OECD Economics Department Working Papers 654, OECD Publishing.
    19. Csilla Horváth & Judit Krekó & Anna Naszódi, 2006. "Is there a bank lending channel in Hungary? Evidence from bank panel data," MNB Working Papers 2006/7, Magyar Nemzeti Bank (the central bank of Hungary).
    20. Chmielewski, Tomasz, 2005. "Bank risks, risk preferences and lending," MPRA Paper 5131, University Library of Munich, Germany, revised 15 Jan 2006.
    21. Konstantins Benkovskis, 2008. "Is there a Bank Lending Channel of Monetary Policy in Latvia? Evidence from Bank Level Data," Working Papers 2008/01, Latvijas Banka.
    22. Jane Bogoev, 2011. "What Drives Bank Lending in Domestic and Foreign Currency Loans in a Small Open Transition Economy with Fixed Exchange Rate? The Case of Macedonia," Comparative Economic Studies, Palgrave Macmillan, vol. 53(2), pages 307-331, June.
    23. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
    24. Milan Aleksic & Ljiljana Djurdjevic & Mirjana Palic & Nikola Tasic, 2008. "Interest Rate Transmission in a Dollarized Economy: the Case of Serbia," Working papers 15, National Bank of Serbia.
    25. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
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