Assessing the Interest Rate and Bank Lending Channel of ECB Monetary Policies

2013 ◽  
Author(s):  
Jerome Creel ◽  
Paul Hubert ◽  
Mathilde Viennot
Keyword(s):  
Interest Rate ◽  
Bank Lending ◽  
Bank Lending Channel ◽  
Monetary Policies ◽  
Lending Channel ◽  
The Interest Rate

Inside the Bank Box

2019 ◽  
pp. 368-405
Author(s):  
Leonardo Gambacorta ◽  
Paul Mizen
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Adjustment Costs ◽  
Bank Lending ◽  
Bank Capital ◽  
Bank Lending Channel ◽  
Lending Channel ◽  
Pass Through ◽  
The Interest Rate

Central bank policy operates first through financial markets and then through banks as they adjust their interest rates. This chapter discusses the transmission of policy in this first step of the monetary transmission mechanism, known as interest-rate pass-through. Historically, the focus of attention has been the interest-rate channel. We show the origins of this channel via a microfounded model of interest-rate setting by deposit-taking institutions that are Cournot oligopolists facing adjustment costs. We then examine other channels such as the bank lending channel and the bank capital channel and the role of central bank communications, signaling, and forward guidance over future interest rates. Each is shown to influence the setting of current short-term interest rates. The chapter closes with some issues for the future of pass-through in the transmission process.

scholarly journals What Role Does the Housing Market Play for the Macroeconomic Transmission Mechanism?

2020 ◽  
Vol 13 (6) ◽  
pp. 112
Author(s):  
Mats Wilhelmsson
Keyword(s):  
Interest Rate ◽  
Housing Market ◽  
Housing Prices ◽  
Bank Lending ◽  
Transmission Mechanism ◽  
Bank Lending Channel ◽  
Lending Channel ◽  
The Interest Rate ◽  
The Impact ◽  
Over Time

The main objective is to answer the question: What role does the housing market play for the transmission mechanism and (in particular) is the impact constant over time? The research question also includes analyzing the importance of the housing market for the transmission mechanism. We estimate an eight-variable structural vector autoregression (SVAR) model of the Swedish economy over the period 1993 and 2018 using quarterly data, covering both the internet bubble in 2000 and the financial crises in 2008. The results indicate that interest rates have both a direct effect on housing prices and an indirect impact through the bank lending channel. Over time, the traditional interest rate channel importance has been stable. On the other hand, the role of the bank lending channel has increased over time. Household debt has increased substantially in Sweden and elsewhere. That means that the interest rate sensitivity in society has increased. Based on the results, it is possible to evaluate and forecast potential house price effects (both direct and indirect) when the interest rate changes.

scholarly journals Monetary Policy in Nigeria: Investigating the Role of Private Sector Credit

2020 ◽  
Vol 03 (12) ◽  
Author(s):  
Musa U. ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Private Sector ◽  
Bank Lending ◽  
Transmission Mechanism ◽  
Call Rate ◽  
Bank Lending Channel ◽  
Treasury Bill ◽  
Lending Channel ◽  
Lending Rate

This study examines the interest rate channel of monetary policy rates through private sector credits to prices. It applies an approach that is not common in monetary policy transmission mechanism in literature as many studies on transmission mechanism of monetary policy only examine statistical relationship between policy variables and target variables which may not be able to explain the pathway through which the monetary policies are transmitted. This paper uses mediation approach to assess the significance of causal path of interest rate through the bank lending channel. This paper dwelt on the transmission paths- from maximum interest rate, inter-bank call rate, treasury bill rate to prices through the private sector credits. The findings of this study lay credence to effective and significant transmission effects of interest rates (maximum lending rate, interbank lending rate and treasury bill rate) through private sector credit to prices. The paper concludes that maximum lending rate path has the highest significant transmission effect to prices. This is followed by the treasury bill rate and the inter-bank call rate respectively. The findings in this study is new in the case of Nigeria as no previous studies have applied mediation approach to the study of transmission mechanism of bank lending channel in Nigeria. Central banks should explore ways to effectively make policy towards effectively directing the monetary policy through maximum lending rate and treasury bill rates as they have the most significant paths through which the monetary policy rate is transmitted to prices.

Monetary Policy Pass-through, Ownership and Crisis: How Robust is the Indian Evidence?

2021 ◽  
Vol 15 (4) ◽  
pp. 456-483
Author(s):  
Jugnu Ansari ◽  
Saibal Ghosh
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Bank Lending ◽  
Loan Pricing ◽  
Lending Channel ◽  
Private Banks ◽  
Monetary Policy Shock ◽  
Pass Through ◽  
The Interest Rate ◽  
The Impact

Employing disaggregated data for 2001–2016, this study investigates the lending and loan pricing behaviour of state-owned and domestic private banks in response to monetary policy. Three major findings emerge. First, although both the interest rate and the bank lending channels are relevant for monetary pass-through, there is a trade-off: the impact of the former is much higher than the latter, although it occurs with a significant lag. Second, domestic private banks have a far greater response to a monetary policy shock under the interest rate channel, whereas state-owned banks display a greater response under the bank-lending channel. And finally, state-owned banks cut back lending during periods of crises, although no such response is manifest in domestic private banks. JEL Codes: C23, D4, E43, E52, G21, L10

Real interest rate, income and bank loans: panel evidence from Egypt

2019 ◽  
Vol 12 (2) ◽  
pp. 227-243
Author(s):  
Mohamed Aseel Shokr
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Bank Lending ◽  
Bank Loans ◽  
Bank Lending Channel ◽  
Content Type ◽  
Lending Channel ◽  
Policy Shocks ◽  
Effect Of Monetary Policy ◽  
The Impact

Purpose This paper aims to examine the effectiveness of monetary policy on bank loans in Egypt using generalized method of moments (GMM) model. Also, it investigates the impact of bank level variables, namely, total assets, liquidity, capital and income on bank loans. It develops the equation of loans, which is introduced by Ehrmann et al. (2002) using bank level variables such as income and the interaction between income and interest rate. Design/methodology/approach This paper examines the impact of monetary policy shocks on bank loans in Egypt by applying the GMM technique and panel data from 1996 to 2014. Findings The results reveal that real interest rate has a significant impact on bank loans, which indicates that the bank lending channel is effective in Egypt. Furthermore, the bank level variables, namely, banks’ size, liquidity and income have significant effects on bank loans in Egypt, which sustains the heterogeneous effect of monetary policy on bank loans. Therefore, the Central Bank of Egypt (CBE) can adjust interest rate to influence the bank loans and total demand. Research limitations/implications It does not examine the effect of monetary policy on small and large banks in Egypt. Practical implications The policy implications from this paper indicate that the monetary authority in Egypt should adjust interest rate to stabilize the bank loan supply. By stabilizing the bank loans, the monetary authority is able to stabilize investment, consumption and total demand. Social implications The relevance of bank lending channel indicates that the role of commercial banks is very important in transmitting monetary policy shocks to the real sector. Originality/value It is important for the CBE, banks and people because it shows the effectiveness of bank lending channel and the effect of global financial crisis on the Egyptian economy.

scholarly journals Market structure, state ownership and monetary policy transmission through bank lending channel: Evidence from Vietnamese commercial banks

2021 ◽  
Vol 10 (3) ◽  
pp. 164-177
Author(s):  
Huu Huan Nguyen ◽  
Minh Vu Ngo ◽  
Thanh Phuc Nguyen
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Market Structure ◽  
Commercial Banks ◽  
Banking Sector ◽  
Bank Lending ◽  
State Ownership ◽  
Bank Loan ◽  
Bank Lending Channel ◽  
Lending Channel

This paper examines the impact of market structure and state ownership on bank lending as a transmission channel for monetary policies. For controlling the effects of bank heterogeneities and macroeconomic factors on bank lending, dynamic models using two-step difference GMM with panel data collected from 25 Vietnamese commercial banks and the Vietnamese banking sector from 1999 to 2017 are employed. Results indicate that a higher level of concentration in the banking market and state ownership dampen the expected impacts of interbank interest rate on the loan growth in commercial banks, which decreases the effectiveness of monetary policy via the bank lending channel. These results are robust regarding the use of alternative measures of market structure and the inclusion of event time variables in the dynamic model. Based on the findings, monetary policy could be implied using the significant moderating impacts of state-ownership as well as the market structure of the Vietnamese banking sector on the relationship between bank loan supply and interbank interest rate.

scholarly journals The bank lending channel and monetary policy rules for Eurozone banks: further extensions

2015 ◽  
Vol 15 (1) ◽  
Author(s):  
Nicholas Apergis ◽  
Stephen M. Miller ◽  
Effrosyni Alevizopoulou
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Bank Lending ◽  
Monetary Shocks ◽  
Policy Rule ◽  
Bank Lending Channel ◽  
Lending Channel ◽  
Main Indicator ◽  
Monetary Policy Rule ◽  
Loan Supply

AbstractThe monetary authorities affect macroeconomic activity through various channels of influence. This paper examines the bank lending channel, which considers how central bank actions affect the loan supply through its main indicator of policy, the real short-term interest rate. This paper employs the endogenously determined target interest rate, emanating from the European Central Bank’s monetary policy rule, to examine the operation of the bank lending channel. Furthermore, it examines whether different bank-specific characteristics affect how Eurozone banks react to monetary shocks. That is, do sounder banks react more to the monetary policy rule than less-sound banks? The paper finds evidence of an active and statistically and economically significant bank lending channel for the Eurozone between 2000 and 2009.

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