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The Role of Banks in Monetary Policy Transmission: Empirical Evidence from Russia
Author(s) -
Juurikkala Tuuli,
Karas Alexei,
Solanko Laura
Publication year - 2011
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2010.00935.x
Subject(s) - capitalization , monetary policy , economics , monetary transmission mechanism , transmission channel , monetary economics , monetary base , empirical evidence , central bank , credit channel , transmission (telecommunications) , financial system , inflation targeting , engineering , philosophy , linguistics , electrical engineering , epistemology
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 examine whether the central bank's monetary policy stance affects banks' lending behavior. 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.