An Examination of the Bank Lending Channel and Monetary Policy During the Pre- and Post-Crisis Period

Abstract

The purpose of this paper is to analyze the performance, the risk-taking level and the credit growth of fourteen emerging and developed countries’ banks. Also, we aim to assess the influence of monetary policy on the bank lending channel in both pre- and post-crisis periods and whether this reaction changes between expansionary and contractionary regimes. Therefore, we employ both conventional and unconventional measures. As we find, the macroeconomic factors improve the banks’ performance and the credit growth while the level of liquidity has a prominent role in the determination of the loans supply. We find also some interesting results since we observe a significant change in the way that monetary policy is conducted. We assert that the bank lending channel operated effectively in pre-crisis period, whereas monetary policy had insignificant impact of banks’ credit growth during the post- crisis period. Nevertheless, we argue that the effect of unconventional measures on the bank lending channel is statistically important.