Financial Structure, Bank Lending Rates, and the Transmission Mechanism of Monetary Policy

66 Pages Posted: 15 Feb 2006

See all articles by Carlo Cottarelli

Carlo Cottarelli

International Monetary Fund (IMF)

Angeliki Kourelis

University of Louisville - College of Business - Department of Economics

Date Written: March 1994

Abstract

The stickiness of bank lending rates with respect to money market rates is often regarded as an obstacle to the smooth transmission of monetary policy impulses. Yet, no systematic measure of the different degree of lending rate stickiness across countries has been attempted. This paper provides such a measure. It also relates the different degree of lending rate stickiness to structural features of the financial system, such as the existence of barriers to competition, the degree of development of financial markets, and the ownership structure of the banking system. Thus, the paper provides further evidence on the relationship between structural financial policies and monetary policy, as well as on the relevance of credit markets for the monetary policy transmission mechanism. The role of administered discount rates in speeding up the adjustment of lending rates is also discussed.

JEL Classification: E43, E44, E52, E58

Suggested Citation

Cottarelli, Carlo and Kourelis, Angeliki, Financial Structure, Bank Lending Rates, and the Transmission Mechanism of Monetary Policy (March 1994). IMF Working Paper No. 94/39, Available at SSRN: https://ssrn.com/abstract=883493

Carlo Cottarelli (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Angeliki Kourelis

University of Louisville - College of Business - Department of Economics

Louisville, KY 40292
United States

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