Bank Lending Channel of Listed Banks in China -- Bank Level Panel Data Analyses
Abstract: The Bank Lending Channel, proposed by Bernanke & Blinder (1988), among other transmission mechanisms, is hypothesized to exist in China because of the dominance of the Chinese banking system. This paper mainly investigates the effect of monetary policy rate change on the lending behavior of Chinese banks. The study firstly used the aggregated data of all banks including policy banks, commercial ones and rural credit cooperatives, it found no evidence of bank lending channel on the aggregated level, due to the influential of state direction rather than rate change’s impact. In contrast, using the bank-level balance sheet data from all sixteen listed banks in China, which allows a detailed investigation on how banks may differ in their responsiveness to a policy rate shock. It found evidence to support bank lending channel (BLC) in the panel level. At the disaggregated level, BLC existences were also found for the Joint-Stock Commercial Banks (JSCB) and medium-sized ones, while no evidence was found for the State-Owned Commercial Banks (SOCB) or the larger and smaller peers. The SOCBs and JSCBs also differ from each other in terms of the deposit/loan ratio’s impact over the loans due to their difference in the composition of funding sources.
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