Bank Lending Channel of Monetary Policy: Dynamic Panel Data Evidence from Sierra Leone

Bangura, Morlai; Ngombu, Augustine; Pessima, Sandy; Kargbo, Isatu

doi:10.4236/me.2021.125053

Cited by 3 publications

(7 citation statements)

References 33 publications

(47 reference statements)

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“…The price of staple goods such as rice was controlled. The pursuit of exchange rate stability was the primary goal of the central bank (Bangura et al, 2021), but there were multiple changes of exchange rate regime during the 1980s, including periods of a dual exchange rate regime, large parallel market spreads, and several devaluations.…”

Section: Contextmentioning

confidence: 99%

“…The BSL adopted a money targeting framework, with reserve money as the operating target, and shifted more to the use of indirect instruments. Restrictions on current account transactions were lifted and a more flexible exchange rate regime implemented (Bangura et al, 2021). Despite the upheaval of the civil war, macroeconomic management mostly continued in this fashion through the 1990s.…”

Section:  Great Disinflation (1996-2020)mentioning

confidence: 99%

“…o The BSL has shifted away from money targeting. Like many developing country central banks, the BSL has moved away from a money targeting framework in recent years as the relationship between inflation and monetary aggregates has appeared less clear (Bangura et al, 2021).…”

Section:  Great Disinflation (1996-2020)mentioning

confidence: 99%

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Sierra Leone

2022

IMF Staff Country Reports

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all FAD), Celine Bteish (MCD), Naoya Kato (SPR), and Yakama Jones (Sierra Leone Ministry of Finance). Melody Manning and Edwin Magno provided editorial support. CLIMATE CHANGE: MAINSTREAMING ADAPTATION IN SIERRA LEONE ____________ _ _ BOXES 1. Climate Change and Mining Activities ________________________________________________ assets from climate-related damage, less public resources due to limited political engagement, and adverse market prices (Islam and Windel, 2017). Macro vulnerability requires fiscal policies to balance the needs of climate actions and debt sustainability, while weak institutions require strong PFM to plan and govern climate spending. The fiscal space remains tight with large contingent spending needs to mitigate and adapt to climate change, 4 which significantly limits the capacity for risk transfer, post-disaster relief, and reconstruction expenditure. Competing development demand with investment in adaptation requires prioritizing projects that meet both development and adaptation purposes. Fragile fiscal frameworks and weak budget execution also undermine the effective response to natural hazards, and call for strong PFM to ensure efficient and transparent spending on climate actions B. Climate Commitments and Actions Nationally Determined Contributions (NDCs) submitted by countries under the Paris Agreement of the United Nations Framework Convention on Climate Change (UNFCCC) represent pledges to limit global warming. At the heart of the Paris Agreement, NDCs embody countries' mitigation and adaptation efforts to combat climate change. Sierra Leone has developed a national strategy to combat climate change and adopted a framework for crisis response. Sierra Leone approved the first NDC in November 2016 and presented the updated version in 2021, which identified a broad range of sectors affected by climate change. 5 It also envisions to achieve mitigation goals of reducing CO2 emissions by 5 percent before 2025, 10 percent before 2030, and 25 percent before 2050, and sets adaptation goals of reducing vulnerability by half by 2030.In 2021, Sierra Leone published the initial National Adaptation Plan (iNAP) to enable decisive and sustainable actions in adaptation identified in the updated NDC. It includes the four key blocks along the lines developed by UNFCCC, namely i) identifying climate impacts, vulnerabilities, and risks, ii) adaptation-related policies, plans and programs, iii) mainstreaming of adaptation, and iv) monitoring evaluation and reporting. The iNAP also identified five categories of adaptation programs (physical investments, human capacity development, institutional strengthening, regulatory modifications, research) for each vulnerable sector. Together with the National Adaptation Plan of Action (NAPA) developed in 2007, the authorities have prioritized 24 adaptation projects with detailed rationales, project objectives, inputs, outputs, institutional arrangements, risk and barriers, monitoring, and cost estimates (Irish Aid, 2015). However, selection criteria to prioriti...

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Section: Contextmentioning

confidence: 99%

Section:  Great Disinflation (1996-2020)mentioning

confidence: 99%

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Sierra Leone

2022

IMF Staff Country Reports

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“…Theoretically, the literature highlights several transmission channels, namely the interest rate channel, the asset price channel, the exchange rate channel, and finally the bank credit channel (Bangura et al, 2021). The effectiveness of monetary policy depends heavily on the choice of transmission channel used, as well as on the specific characteristics of banks and the economic environment in which they operate.…”

Section: Introductionmentioning

confidence: 99%

“…From this perspective, this channel identifies two sub-channels through which the transmission of credit-based monetary policy operates. On the one hand, the balance sheet channel, which influences borrowers' net worth and therefore their ability to take out loans, and on the other, the bank credit channel, which acts through the reaction of the supply of loans to the economy to changes in the monetary policy stance (Bangura et al, 2021).…”

Section: Introductionmentioning

confidence: 99%

Bank Credit Channel of Monetary Policy in the UEMOA Zone: A TVP-VAR Approach

Séraphin,

Fabrice Méa

2023

IJEF

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The main objective of this article is to analyze the transmission of monetary policy in the WAEMU zone via the bank credit channel, using monthly data from January 1999 to December 2021. Methodologically, we apply a TVP-VAR model that allows coefficients to vary over time to reflect potential changes in time series dynamics. First, we find that the bank credit channel remains relatively weak in the union. Secondly, monetary policy shocks have evolved over time. Thirdly, the tertiary sector is relatively more responsive to monetary policy shocks than the primary and secondary sectors.

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Threshold Effect in the Bank Lending Channel of Monetary Policy Transmission and the Role of Bank Portfolio Deterioration: A PSTR Specification in the WAEMU Zone

PRAO,

AKA,

DJA

2023

IREF

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The objective of this paper is to analyse the influence of monetary policy on credit supply in the WAEMU zone over the period 1996-2017. The study focuses on the WAEMU countries, except for Guinea-Bissau, due to the unavailability of sufficient data. We apply the Panel Smooth Transition Regression (PSTR) model of Gonzalez et al. (2005). The results reveal the non-linearity of the link between monetary policy and credit supply. There is a threshold of credit risk exposure of 8.726% above which monetary policy loses its effectiveness. Indeed, monetary policy has a positive effect on the supply of credit when the value of the gross bank portfolio deterioration rate is less than or equal to the threshold of 8.726% and an insignificant effect above this threshold. Above this threshold, the link between monetary policy and bank credit supply is distended. In this case, it is the level of economic activity that stimulates the supply of bank credit in this area. These results indicate that the effectiveness of the monetary policy conducted by the Central Bank of West African States (BCEAO), through the bank credit channel, should take into account the level of credit risk attained by banks. Thus, the study recommends that the authorities further strengthen prudential supervision within the WAEMU.

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Bank Lending Channel of Monetary Policy: Dynamic Panel Data Evidence from Sierra Leone

Abstract: The purpose of this study is to investigate the presence of a bank lending channel of monetary policy in the Sierra Leone. This study uses a dynamic panel data method namely generalized method of moments (GMM) procedure, employing quarterly bank-level data spanning the period 2014-2018, to

Cited by 3 publications

References 33 publications

Sierra Leone

Sierra Leone

Bank Credit Channel of Monetary Policy in the UEMOA Zone: A TVP-VAR Approach

Threshold Effect in the Bank Lending Channel of Monetary Policy Transmission and the Role of Bank Portfolio Deterioration: A PSTR Specification in the WAEMU Zone

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