State-Run Banks, Money Growth, and the Real Economy
51 Pages Posted: 23 Apr 2013 Last revised: 18 Jan 2016
Date Written: January 11, 2016
Aggregate credit and investment growth correlate with prior money growth more strongly in economies whose banking systems are more fully state-run. Within countries, individual state-run banks’ lending correlates with prior money growth, while otherwise similar private-sector banks’ lending does not. Tests exploiting heterogeneity in likely political pressure on state-run banks associated with, e.g. central bank independence, privatizations, and election years, are consistent with a higher correlation of state-run banks’ lending with prior money growth if political pressure is stronger. These findings are consistent with a command-and-control channel of monetary stimulus transmission operating via state-run banks.
Keywords: ownership structure, loan growth, capital investment, monetary policy, banking
JEL Classification: G01, G21, G28, G3, O16, E5
Suggested Citation: Suggested Citation