Does bank efficiency affect the bank lending channel in China?

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Title: Does bank efficiency affect the bank lending channel in China?
Author: Fungáčová, Zuzana ; Kerola, Eeva ; Weill, Laurent
Organization: Bank of Finland
Department / Unit: Bank of Finland Institute for Emerging Economies (BOFIT)
Series: BOFIT Discussion Papers
Series number: 3/2021
Year of publication: 2021
Publication date: 8.2.2021
Pages: 38
Subject (yso): pankit; luotonanto; tehokkuus; rahapolitiikka
Keywords: Bofit-kokoelma; Kiina
JEL: E52; G21
Other keywords: Chinese banks; monetary policy; bank efficiency; bank lending channel
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.
Table of contents: Contents Abstract ....... 4 1 Introduction ...... 5 2 Monetary policy in China....... 7 3 Data and methodology ....... 10 3.1 Data ........ 10 3.2 Bank efficiency........ 11 3.3 Methodology ....... 12 4 Results ...... 14 4.1 Main estimations........ 14 4.2 Estimations by bank type ....... 15 4.3 Estimations by loan-to-deposit ratio........ 17 4.4 The influence of shadow banking expansion ........ 18 4.5 Alternative efficiency measurement........ 19 5 Conclusion........ 20 References ....... 22 Tables ........ 24
Rights: https://helda.helsinki.fi/bof/copyright


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