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The validity of bank lending channel in Zimbabwe

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  • Munyanyi, Musharavati Ephraim

Abstract

This paper seeks examine the validity of the bank lending channel in Zimbabwe. It estimates the relative impact of this channel on key economic variables such as, economic growth and inflation by covering the period from 1970 to 2014. For this purpose, Vector Autoregression (VAR) approach is employed. Impulse Response Functions are also generated to confirm the response of a shock in bank lending upon itself and other variables (economic growth and inflation). The result findings indicate that bank lending channel does not have a significant role in monetary transmission mechanism of Zimbabwe. The results imply that the bank lending channel should be improved through for example, tightening creditworthiness standards, revamping accounting standards and bank credit assessment capabilities, as well as setting up an effective judicial system to improve banks’ ability to enforce on collateral.

Suggested Citation

  • Munyanyi, Musharavati Ephraim, 2016. "The validity of bank lending channel in Zimbabwe," MPRA Paper 74301, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:74301
    as

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    References listed on IDEAS

    as
    1. Greenwood, Jeremy & Jovanovic, Boyan, 1990. "Financial Development, Growth, and the Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1076-1107, October.
    2. Gambacorta, Leonardo, 2005. "Inside the bank lending channel," European Economic Review, Elsevier, vol. 49(7), pages 1737-1759, October.
    3. World Bank, 2008. "World Development Indicators 2008," World Bank Publications, The World Bank, number 11855, June.
    4. P. Honohan, 2000. "Banking System Failures in Developing and Transition Countries: Diagnosis and Prediction," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 29(1), pages 83-109, February.
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    More about this item

    Keywords

    Economic Growth; Bank lending channel; VAR;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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