An Analysis of the Impact of Monetary Policy on Bank Lending in Russia

Abstract

This article examines the role of the banking channel in transmitting Russia's monetary policy. As the financial market is forming and data samples are increasing, there are emerging new conditions for getting a deeper insight into various aspects of monetary policy conducted by the Bank of Russia. The article explores the dependence of bank lending on monetary policy. The author tries to establish whether there are causal statistically significant instruments of monetary policy for the volumes of corporate lending. As independent variables, the author investigates the impact of the monetary base, the money supply, the refinancing rate, and the interbank lending rate. The assessment was conducted using the generalized method of moments. Based on a quarterly sample of data from 2002 to 2013, the author establishes the statistically significant impact of the money supply, the monetary base, the interbank lending rate, and the refinancing rate. The resulting empirical findings substantiate the hypothesis about the existence of a bank lending channel in Russia.

Heterogeneous Bank Lending Responses to Monetary Policy: Empirical Evidence From Russia

“…The importance of the action of a bank loan on the transmission of monetary policy highly depends on whether bank loans and deposits are special, or in other words, how difficult it is to do the substitution [5]. Thus, some authors [6][7] mention that the credit channel depends, primarily, on the degree to which the banks can easily substitute other sources of financing for deposits and on the degree to which borrowers are able to find alternative sources of funding.…”