Monetary Policy Transmission - Bank Lending Channel and Banking Market Structure. The Case of Georgia, Azerbaijan, and Armenia.
|Author:||Mgr. Tinatin Jvaridze|
|Year:||2019 - summer|
|Leaders:|| Mgr. Jan Mareš, Ph.D.
|Work type:|| Finance, Financial Markets and Banking
|Awards and prizes:|
|Abstract:||In the thesis, we examine the bank lending channel and the effect of banking market structure on
the transmission of monetary policy in Georgia, Armenia, and Azerbaijan. We employ bank-level
data for the period of 2011-2017 to detect if banks with different characteristics react differently
to monetary policy shocks. Banking market structure is proxied by three measures-CR5, HHI, and
Lerner Index. We estimate two types of models: dynamic (with system GMM) and static (with FE)
models. We also consider the effect of dollarization on bank loan supply as well as on monetary
policy. We do not find consistent evidence that banks react differently to monetary policy shocks
depending on bank characteristics (size, capitalization, and liquidity). Hence the existence of the
lending channel is not conclusive. Nevertheless, the results show that monetary policy is less
effective in more concentrated markets. This finding is robust in all specifications with both types
of models. In this sense, competition is not significant. The results also suggest that dollarization
weakens the effect of domestic monetary policy.