Abstract
This paper investigates the heterogeneous response of bank lending following a monetary policy change. The study was conducted in the context of developing countries and is based on dynamic panel error correction methods using quarterly Ugandan bank level data for the period 2009 - 2019. Results support the presence of heterogeneity in bank lending response to monetary policy changes by bank size and ownership type. Specifically, monetary policy pass through is weaker in large foreign banks and stronger in smaller Pan African banks. Moreover, bank lending response to monetary policy is asymmetric with insignificant effects when the policy rate is falling. Risk, government borrowing, capital, and liquidity at the bank level, competition at the industry level, and inflation at the macro level are some of the factors that explain the response of bank lending to monetary policy.
Published Version
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