The Role of Banks in Monetary Policy Transmission: Empirical Evidence from Russia
27 Pages Posted: 8 Jul 2009
Date Written: June 30, 2009
This paper focuses on the role of the banking sector in monetary policy transmission in an emerging economy with a rapidly developing financial system. Specifically, we exam whether the central bank's monetary policy stance affects banks' lending behaviour. Based on a comprehensive quarterly dataset on all Russian banks from 1Q1999 to 1Q2007, we find evidence for the existence of a bank lending channel in Russia. Contrary to several studies on developed economies, the level of a bank's capitalization matters for the transmission process. Better capitalized banks are less likely to adjust their lending practices following a change in the monetary policy stance.
Keywords: monetary policy transmission, bank lending, Russia
JEL Classification: C23, E44, E52, G21
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