Does Bank Efficiency Affect the Bank Lending Channel in China?

38 Pages Posted: 10 Feb 2021

See all articles by Zuzana Fungáčová

Zuzana Fungáčová

Bank of Finland - Institute for Economies in Transition (BOFIT)

Eeva Kerola

Bank of Finland

Laurent Weill

University of Strasbourg - LaRGE Research Center (Laboratoire de Recherche en Gestion et Economie)

Date Written: February 8, 2021

Abstract

This work examines the impact of bank efficiency on the bank lending channel in China. Using a sample of 175 Chinese banks over the period 2006–2017, we investigate how the reaction of the loan supply to monetary policy actions depends on a bank’s efficiency. While bank efficiency does not exert an impact on the effectiveness of monetary policy transmission overall, it does favor the transmission of monetary policy for banks with low loan-to-deposit ratios. In addition, the expansion of shadow banking activities has been associated with a positive impact of bank efficiency on monetary policy transmission. These results suggest that bank efficiency may influence the bank lending channel in certain cases.

JEL Classification: E52, G21

Suggested Citation

Fungacova, Zuzana and Kerola, Eeva and Weill, Laurent, Does Bank Efficiency Affect the Bank Lending Channel in China? (February 8, 2021). BOFIT Discussion Paper No. 3/2021, Available at SSRN: https://ssrn.com/abstract=3782976

Zuzana Fungacova (Contact Author)

Bank of Finland - Institute for Economies in Transition (BOFIT) ( email )

Snellmaninaukio
PO Box 160
Helsinki 00101
Finland

HOME PAGE: http://www.bof.fi/bofit_en/index.htm

Eeva Kerola

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

Laurent Weill

University of Strasbourg - LaRGE Research Center (Laboratoire de Recherche en Gestion et Economie) ( email )

61 Avenue de la Forêt Noire
F-67085 Strasbourg Cedex
France

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