Financial Structure, Bank Lending Rates, and the Transmission Mechanism of Monetary Policy

March 1, 1994

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Angeliki Kourelis, and Carlo Cottarelli. Financial Structure, Bank Lending Rates, and the Transmission Mechanism of Monetary Policy, (USA: International Monetary Fund, 1994) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The stickiness of bank lending rates with respect to money market rates is often regarded as an obstacle to the smooth transmission of monetary policy impulses. Yet, no systematic measure of the different degree of lending rate stickiness across countries has been attempted. This paper provides such a measure. It also relates the different degree of lending rate stickiness to structural features of the financial system, such as the existence of barriers to competition, the degree of development of financial markets, and the ownership structure of the banking system. Thus, the paper provides further evidence on the relationship between structural financial policies and monetary policy, as well as on the relevance of credit markets for the monetary policy transmission mechanism. The role of administered discount rates in speeding up the. adjustment of lending rates is also discussed.

Subject: Bank credit, Banking, Commercial banks, Competition, Discount rates, Financial institutions, Financial markets, Financial services, Money, Money markets

Keywords: Africa, Bank credit, Commercial banks, Competition, Discount rates, Lending rate, Money market rate, Money markets, Prime rate, Rate stickiness, Transmission mechanism, Treasury bill rate, WP

Publication Details

Pages:

66
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1994/039
Stock No:

WPIEA0391994
ISBN:

9781451845761
ISSN:

1018-5941

Notes

Also published in Staff Papers, Vol. 41, No. 4, December 1994.

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