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Publication Detail
BSP WPS 2020-11: Is Bank Lending Channel of Monetary Policy Evident in the Philippines? A Dynamic Panel Data Approach

Understanding monetary policy transmission through the bank lending channel is imperative as impact of monetary policy adjustments to Philippine banking system can be amplified in the real economy. Using dynamic panel Generalized Method of Moments (GMM) model for quarterly micro-level bank data, this research finds that the bank lending channel of monetary policy in the Philippines is non-existent as highly liquid banks tend to react more to monetary tightening than less liquid banks. More liquid banks would rather hold their stock of liquid assets as buffers against crises or contingencies than sustain their lending activity amid monetary tightening. Moreover, banks are risk-sensitive in their lending behavior as increase in the cost of borrowing following tighter monetary policy could increase the likelihood of loan default. The study also concludes that liquidity is the only bank-specific feature that has a significant influence on bank lending.

Bangko Sentral ng Pilipinas
Authors Keywords
Armas, Jean Christine, A. ; Bank lending channel; monetary policy transmission; dynamic panel data;
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Published in 2020 and available for Downloaded 0 times since July 08, 2021
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