On the bank lending channel in a euroised economy: the case of Serbia

Abstract

This paper investigates the bank lending channel of monetary transmission in Serbia. We collect individual bank balance sheet data for 33 banks over the period 2008Q3–2011Q2 and employ dynamic panel estimation techniques. Two different bank loan supply functions are investigated according to the currency denomination of bank loans in Serbia. Our findings indicate that there is a significant bank lending channel through the domestic and foreign reference interest rates in the growth of domestic currency loans. In the case of foreign currency loans, there is non-statistical evidence for the existence of a bank lending channel which may be related to the prevalence of long-term loans in total foreign currency loans and relatively short sample size.