The bank lending channel and monetary transmission in Central, Eastern and South-Eastern European countries

Papavangjeli, Meri (2021): The bank lending channel and monetary transmission in Central, Eastern and South-Eastern European countries. Published in: Bank of Albania Economic Review 2021 H1 (10 July 2021): pp. 1-15.

Abstract

Using disaggregated data for 266 individual banks from Bankscope database and other supplementary sources, this article investigates the functioning of the bank lending channel and monetary transmission in 10 Central, Eastern and South-Eastern European (CESEE) countries over the period 2010-2018. It also takes into account the banks’ characteristics such as: size and capitalisation, classifying the countries in three groups according to the development level of their banking sector, captured by the EBRD banking reform criteria. Results confirm the theory of bank lending channel, with smaller banks being more sensitive to monetary contractions in less developed financial systems. Capitalisation has a positive effect on loan growth, and changes in funding costs have the most significant impact on small and less capitalised banks. GDP growth and inflation have a positive impact on loan growth in all country groups.

• Item Type: MPRA Paper
• Language: English
• Keywords: bank lending channel; size and capitalisation; monetary transmission
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply ; Credit ; Money Multipliers; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; P - Economic Systems > P3 - Socialist Institutions and Their Transitions > P34 - Financial Economics

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