What is it about?
The study explains how the banks balance sheet plays a role in the transmission of monetary policy
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Why is it important?
The study is significant because it sheds light on the mechanism involved in the interplay between monetary policy, bank capital, and lending, providing valuable insights for policymakers and future research directions.
Perspectives
The main findings are as follows: 1) The study finds evidence of both the bank lending and bank capital channels in South Asia. The analysis reveals a Granger causality between changes in bank capital position and policy rate adjustments, indicating a dynamic interplay between these variables. 2) The findings suggest, although direct effects of capital position changes on bank lending appear negligible, a nuanced examination uncovers the moderating influence of capital position changes on the impact of policy rate fluctuations on lending behavior. 3) The study suggests that healthier banking systems weaken the bank lending channel in South Asia.
Khalil Ullah Mohammad
Bahria University
Read the Original
This page is a summary of: Deciphering the black-box of monetary policy transmission in South Asia, Economic Journal of Emerging Markets, April 2024, Universitas Islam Indonesia (Islamic University of Indonesia),
DOI: 10.20885/ejem.vol16.iss1.art5.
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