Abstract
Most of the works related to monetary policy transmission mechanisms did not take into account the special case of developing countries. In these countries, given their features (exchange rate rigidity, financial fragility, banking prominence, etc.), it seems that the most reliable monetary transmission mechanism is the lending channel. The purpose of this paper is to focus specifically on this channel in 16 MENA Countries by using a GMM system on dynamic panel aggregated data from 1990 to 2015. We regress credit volume on the instrument of monetary policy. Meanwhile, we add many control variables to resolve the supply-demand puzzle. Thereafter, we include variables describing the sensitiveness of the lending behavior to the institutional environment quality as well as to key banking sector characteristics. Our results suggest that the lending channel is operational in MENA countries and is often related to past lending behavior. Moreover, the supply of loans is sensitive to institutional framework once there is a change in monetary policy.
Published Version
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