Financial development and the bank lending channel in developing countries

Azofra, Sergio Sanfilippo; Torre-Olmo, Begoña; Cantero-Saiz, María; López-Gutiérrez, Carlos

doi:10.1016/j.jmacro.2017.10.009

Cited by 46 publications

(23 citation statements)

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“…The collapse option effectively constrains all of the yearly moment conditions to be the same and reduces the instrument count and the number of moment conditions used in the difference-in-Hansen test of exogeneity instrument subsets, which makes this test more powerful [90,91]. Many articles have collapsed the instruments used in the System-GMM estimation [69,92,93].…”

Section: Methodsmentioning

confidence: 99%

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Sustainable Banking, Market Power, and Efficiency: Effects on Banks’ Profitability and Risk

2021

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The financial crisis seriously damaged the reputation of the banking sector, as well as its profitability and risk of insolvency, which led many banks to adopt a sustainable approach aimed at balancing long-term goals with short-term performance pressures. This article analyses how sustainable banking practices affect the profitability and the insolvency risk of banks. Moreover, we examine how sustainable strategies determine the effects of market power and efficiency on bank profitability. We used a two-step System-GMM to analyze an unbalanced panel of 1236 banks from 48 countries over the period 2015–2019. We found that sustainable banking practices increased profitability, and market power was an important determinant of profitability among conventional banks, but not among sustainable banks. Higher levels of cost scale efficiency led to greater profitability for both sustainable and conventional banks. However, there was no significant relationship between sustainable banking and insolvency risk. These results indicate that the traditional determinants of bank profitability are not relevant in explaining the superior profits of sustainable banks, which suggests the emergence of a new paradigm related to sustainability among the drivers of bank profitability.

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Section: Methodsmentioning

confidence: 99%

“…Moreover, this sample period covers all of the years since the UN's adoption of SDGs. Finally, to avoid bias and spurious correlations between macroeconomic variables and bank level variables, we removed the countries with fewer than five banks in the sample [69].…”

Section: Selection Of the Samplementioning

confidence: 99%

Sustainable Banking, Market Power, and Efficiency: Effects on Banks’ Profitability and Risk

2021

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“…Previous research on the mechanism of monetary transmission, especially bank lending channels, has been carried out by Ascarya (2012), Wulandari (2012), Yarasevika et al (2015) and Amaluddin (2007) economic growth in Indonesia. Other studies such as Agha et al (2005), Simpasa et al (2015), Montes and Monteiro (2014) and Sanfilippo-Azofra et al (2017), emphasize credit channel. They state that the credit channel is a very effective monetary transmission mechanism that affects economic growth in 33 developing countries.…”

Section: Theoretical and Empirical Literaturementioning

confidence: 97%

Responses of Islamic banking variables to monetary policy shocks in Indonesia

Hafidh

2021

IES

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PurposeThis paper investigates the structural model of vector autoregression (SVAR) of the interdependent relationship of inflation, monetary policy and Islamic banking variables (RDEP, RFIN, DEP, FIN) in Indonesia. By using monthly data for the period 2001M01-2019M12, the impulse response function (IRF), forecasting error decomposition variation (FEDV) is used to track the impact of Sharīʿah variables on inflation (prices).Design/methodology/approachThis research uses quantitative approach with SVAR model to reveal the problem.FindingsThe empirical results of SVAR, the IRF show that policy shocks have a negative impact on all variables in Islamic banking except the equivalent deposit interest rate (RDEP). The impact of both conventional (7DRR) and Sharīʿah (SBIS) policies has a similar pattern. While the transmission of Sharīʿah monetary variables as a policy operational target in influencing inflation is positive. In addition, the FEDV clearly revealed that the variation in the Sharīʿah financial sector was relatively large in monetary policy shocks and their role in influencing prices.Originality/valueThe empirical results of SVAR, the IRF show that policy shocks have a negative impact on all variables in Islamic banking except the equivalent deposit interest rate ‘RDEP’. The impact of both conventional “7DRR” and Sharīʿah “SBIS” policies has a similar pattern. While the transmission of Sharīʿah monetary variables as a policy operational target in influencing inflation is positive. In addition, the FEDV clearly revealed that the variation in the Sharīʿah financial sector was relatively large in monetary policy shocks and their role in influencing prices.

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“…Access to alternative sources is determined by the characteristics of banks such as capital, capitalization and liquidity, but also the structure of the banking sector and the market power of individual financial institutions (Gambacorta, 2005;Matousek and Sarantis, 2009). Sanfilippo-Azofra et al (2018) show that banks do not respond to monetary policy in countries with a less developed financial system. In countries with developed financial systems, the efficiency of the banking channel is proven after the financial crisis.…”

Section: Determinants Of Interest Marginsmentioning

confidence: 99%

The Financial Accelerator in Europe after the Financial Crisis

Baková¹

2018

EJOBSAT

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The paper investigates the mechanism of a financial accelerator. In particular, it examines the procyclicality of credit margins in Europe after the financial crisis, with an additional split to small, medium and large-sized banks. The empirical analysis is in contrast with contemporary authors because approve that financial accelerator is not present on the European market after financial crisis. It could be caused by multiple factors, for example structural changes during financial crisis, change in the behaviour of commercial banks or extremely low interest rates. We tested our hypothesis on dataset consists of a data panel with annual data for the period 1998-2015 and includes 2 489 banks from 36 European countries from the Bankscope database. We also provide empirical robust proof that such behaviour is not occurring during the financial crisis and after the financial crisis in the European banking system.

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Financial development and the bank lending channel in developing countries

Cited by 46 publications

References 51 publications

Sustainable Banking, Market Power, and Efficiency: Effects on Banks’ Profitability and Risk

Sustainable Banking, Market Power, and Efficiency: Effects on Banks’ Profitability and Risk

Responses of Islamic banking variables to monetary policy shocks in Indonesia

The Financial Accelerator in Europe after the Financial Crisis

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