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The Transmission of Monetary Policy Through Conventional and Islamic BanksSajjad ZaheerUniversity of Amsterdam Steven OngenaTilburg University - CentER, European Banking Center (EBC); Centre for Economic Policy Research (CEPR) Sweder Van WijnbergenUniversiteit van Amsterdam; Tinbergen Institute; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER) February 1, 2013 European Banking Center Discussion Paper No. 2011-018 CentER Working Paper Series No. 2011-078 Abstract: We investigate the differences in banks’ responses to monetary policy shocks across bank size, liquidity, and type, i.e., conventional versus Islamic, in Pakistan between 2002:II to 2010:I. We find that following a monetary contraction, small banks with liquid balance sheets cut their lending less than other small banks. In contrast large banks maintain their lending irrespective of their liquidity positions. Islamic banks, though similar in size to small banks, respond to monetary policy shocks as large banks. Hence ceteris paribus the credit channel of monetary policy may weaken when Islamic banking grows in relative importance.
Number of Pages in PDF File: 56 Keywords: Monetary policy, Islamic Banking, Pakistan JEL Classification: E5, G2 working papers seriesDate posted: July 19, 2011 ; Last revised: February 5, 2013Suggested CitationContact Information
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