State-Run Banks, Money Growth, and the Real Economy

51 Pages Posted: 23 Apr 2013 Last revised: 18 Jan 2016

See all articles by Randall Morck

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

M. Deniz Yavuz

Purdue University - Krannert School of Management

Bernard Yin Yeung

National University of Singapore - Business School

Multiple version iconThere are 2 versions of this paper

Date Written: January 11, 2016

Abstract

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

Morck, Randall K. and Yavuz, M. Deniz and Yeung, Bernard Yin, State-Run Banks, Money Growth, and the Real Economy (January 11, 2016). Available at SSRN: https://ssrn.com/abstract=2255234 or http://dx.doi.org/10.2139/ssrn.2255234

Randall K. Morck

University of Alberta - Department of Finance and Statistical Analysis ( email )

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National Bureau of Economic Research (NBER)

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European Corporate Governence Institute ( email )

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Asian Bureau of Finance and Economic Research ( email )

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M. Deniz Yavuz (Contact Author)

Purdue University - Krannert School of Management ( email )

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United States

Bernard Yin Yeung

National University of Singapore - Business School ( email )

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BIZ 1 Level 6
Singapore, 119245
Singapore
65 6516 3075 (Phone)
65 6779 1365 (Fax)

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