Investigation the Effect of Banking Marketization in Monetary Policy Transmission through Lending Channel

Document Type : Research Paper


1 Assistant Professor of Economics, Shahid Bahonar University

2 Ph.D Student of Economics, Shahid Bahonar University


Monetary policy transmission through changes in bank facilities is known as one of the key channels of influence of monetary policy. The strength of this channel of monetary policy transmission is highly dependent on economic conditions. The level of relying on the market mechanism in the banking industry is one of the variables that influence the transmission of monetary policy through lending channel that is called banking marketization. The aim of this paper is to analyze the hypothesis that the bank lending channel of monetary policy shocks imposed by monetary authorities is influenced by marketization in the banking system or not? To answer this question have been used two indexes for banking marketization. The ratio of the deposits of non-state-owned banks to the total deposits of all sample banks is the first index and the proportion of loans to non-state-owned enterprises in the total loans of sample banks is the second index. Also multiplication between marketization index and monetary condition index has been regarded to study the effect of increase in banking marketization on monetary policy transmission. Generalized Method of Moments or GMM method is used to estimate the model, and the data of balance sheet of 26 banks in the banking network from 2001 to 2012 has been used. The results show that as expected, with increase the degree of marketization in banking network, the banking network facilities is increased. In addition, banking marketization will weaken the transmission of monetary policy through bank lending.



    1. تقوی، مهدی، و لطفی، علی اصغر (1385). بررسی اثرات سیاست پولی بر حجم سپرده ها، تسهیلات اعطایی و نقدینگی نظام بانکی کشور (1382-1374). پژوهش­های بازرگانی. 20، 166-131.

    2. شریفی رنانی، حسین، کمیجانی، اکبر، و شهرستانی، حمید (1389). بررسی سازوکار انتقال پولی در ایران: رویکرد خود رگرسیونی برداری ساختاری. فصلنامه پول و اقتصاد. 2، 176-145.

    3. صادقی، حسین، رستم زاده، پرویز، و اصغر پور، حسن (1386). تفکیک سیاست های پولی با استفاده از شاخص شرایط پولی (MCI) در ایران. نامه اقتصادی، شماره 63، 82-59.

    4. نظریان، رافیک، فرهادی پور، محمدرضا و فرجی، علی (1392). تأثیر رقابت در صنعت بانکداری بر اثربخشی انتقال آثار سیاست پولی از طریق مجرا وام دهی بانک. فصلنامه روند، سال بیستم، شماره های 61 و 62، 74-43.


    1. Adams, R. M., & Amel, D. F. (2005). The effect of local banking market structure on banking-lending channel of monetary policy. Board of Governance of the Federal Reserve System, Finance and Economic Discussion Series 2005–16.

    2. Aftalion, F., & White, J.L. (1978). A study of a monetary system with a pegged discount rate under Different Market Structures. Journal of Banking and Finance, 2, 351–354.

    3. Allen, F., Qian, J., Zhang, C., & Zhao, M., (2012). China’s financial system: opportunities and challenges. NBER Working Paper Series, Working Paper 17828.

    4. Bernanke, B., & Blinder, A. (1988(. Credit, money, and aggregate demand. Am. Econ. Rev., 78, 435–439.

    5. Bernanke, B. S., & Blinder, A. S. (1992).The federal funds rate and the channels of monetary transmission.American Economic Review, 82(4), 901-921.

    6. Bhaumik, S.K., Dang, V., & Kutan, A.M. (2011(. Implications of bank ownership for the credit channel of monetary policy transmission: evidence from India. J.Bank. Finance, 35, 2418–2428.

    7. Chen, Z, Wu, C, & Xie, S. (2000). The extent of marketization of economic systems in china. Nova Publishers, Dey 11, 1378 AP - Business & Economics - 293 pages.

    8. Church, R, & Roger, W (2000). Industrial organization (management and organizations). May 1, McGraw-Hill Publishing Co. International Ed Edition, 832. ISBN: 0071166459.

    9. Clark, R.(1991). Industrial economics. 1990 Basil Blackwell.

    10. Clarke, P, Gardener, E, Feeney, P., & Molyneux, P. (1988). The genesis of strategic marketing control in British retail banking. International Journal of Banking Marketing, 6, 2, 5–19.

    11. Dı´az, R., & Olivero, M. (2010).On the firm-level implications of the Bank Lending Channel of monetary policy. Journal of Economic Dynamics & Control, 34, 2038–2055.

    12. European Commission (EC) (1997). Impact on services: credit institutions and banking. Single Market Review, Subseries II, V. 4, London.

    13. Ehrmann, M., Gambacorta, L., Martinez-Pages, j., Sevestre, p., & Worms, A. (2003). Financial system and the role of the banks in monetary transmission in the Euro area.United Kingdom: Cambridge University press.

    14. Gambacorta, L., and Mistrulli, E. P. (2004). Does bank capital affect lending behavior?Journal of Financial Intermediation, 13, 436- 457.

    15. Gunji, H., Miura, K., & Yuan, Y. (2009). Bank competition and monetary policy. Japan and the World Economy, 12, 105–115.

    16. Gardener, E & Williams, J. (1996). British bank strategies: balancing customer needs and supply side pressures, in Leo Schuster (ed.), Banking Cultures of the World, Frankfurt: Fritz Knapp Verlag, 591–612.

    17. Gardener, E., Molyneux, P., Williams, J., & Carbo, S. (1997). European savings banks: facing up to the new environment. International Journal of Bank Marketing, 15/7, 243–54.

    18. Gardener, E,. Molyneux, P & Williams, J (1999a). European savings banks: coming of age?. Lafferty Publications, Dublin.

    19. Gardener, E, Barry, H and Jonathan, W (1999b). The new retail banking revolution. The Service Industries Journal, 2, 83–100.

    20. Gomez-Gonzalez, J., and Grosz, F. (2007). Evidence of a bank lending channel for Argentina and Colombia.Cuadernos de economia, 44, 109-126.

    21. Gunji, H., and Yuan, Y. (2010). Bank profitability and the bank lending channel: evidence from China. Journal of Asian Economics, 21, 129-141.

    22. Hernando, I., and Pagez, J (2001). Is there a bank lending channel of monetary policy in spain? ECB Working Paper No 99, 1-54.

    23. Hou, X., and Wang, Q (2013). Implications of banking marketization for the lending channel of monetary policy transmission: evidence from China. Journal of Macroeconomics, 38, 442-451.

    24. Iacoviello, M., and Minetti, R. (2008). The credit channel of monetary policy: evidence from the housing market. Journal of Macroeconomics, 30, 69-96.

    25. Kakes, J. (1998). Monetary transmission and bank lending in the Netherlands. Faculty of Economics, University of Groningen.

    26. Kashyap, A. K., and Stein, J. C. (2000). What do a million Observations on banks say about the transmission of monetary policy? American Economic Review, 90(3), 407-428.

    27. Matousek, S., and Sarantis, N. (2008). The bank lending channel and monetary transmission in Central and Eastern European countries. Journal of Comparative Economics, 37, 321-334.

    28. McLean, J. (1994). Look after the customer. The Banker, May, 64–5.

    29. Milne, A., and Wood, G (2009). The bank lending channel reconsidered. Bank of Finland Research, Discussion Papers.

    30. Mishkin, F. (1996). The channels of monetary transmission: lessons for monetary policy. Banque de France Bulletin, No. 27, 33-44.

    31. Mullineux, A, W, Murinde, V, (2003). Handbook of International Banking, Edward Elgar Publishing,doi: 10.4337/9781843765646, 138-139.

    32. Olivero, M., Li, Y., & Jeon, B. (2010). Competition in banking and the lending channel: Evidence from bank-level data in Asia and Latin America. Journal of Banking & Finance, 35, 560-571.

    33. Stein, J. C. (1998). An adverse-selection model of bank asset and liability management with implications for the transmission of monetary policy. Journal of Economics, 29 (3), 466-486.

    34. VanHoose, D. (1983). Monetary policy under alternative bank market structures. Journal of Banking and Finance, 7, 383–404.

    35. VanHoose, D. (1985). Bank Market Structure and Monetary Control. Journal of Money, Credit and Banking, 17, 298–311.