Abstract
This paper examines the bank lending channel of monetary policy transmission and the effect of banking sector and capital market development on the lending channel using the bank-level panel data of 89 commercial banks in five ASEAN countries (Thailand, Malaysia, the Philippines, Singapore and Indonesia) over the period 1999–2011. The results show that monetary policy has a significant effect via the bank lending channel. The higher the capitalization and liquidity of banks, the weaker the effect of monetary policy via the bank lending channel; however, the greater the size of banks, the stronger the bank lending channel. Banking sector development in terms of banking activities and capital market development leads to a weaker effect of monetary policy through the lending channel, while the development of banks in terms of size strengthens the bank lending channel.
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