Impact of off-balance sheet banking on the bank lending channel of monetary transmission: Evidence from South Asia

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    10 Citations (Scopus)

    Abstract

    Based on a panel data set for 114 South Asian commercial banks, we find that off-balance sheet banking reduces the effectiveness of the bank lending channel of monetary transmission. That is, banks with high exposure to off-balance sheet activities are able to insulate their loan supply against a monetary policy shock thus creating a buffering effect on monetary transmission. We also suggest that these effects are substantial for small, highly-liquid and well-capitalised banks. The buffering effect of off-balance sheet banking on monetary transmission raises important policy issues, particularly with regard to the effectiveness of monetary policy and the definitions of monetary aggregates.
    Original languageEnglish
    Pages (from-to)195 - 216
    Number of pages22
    JournalJournal of International Financial Markets, Institutions and Money
    Volume29
    DOIs
    Publication statusPublished - 2014

    Cite this

    @article{912959ecd29643bab22e79666d5e4e80,
    title = "Impact of off-balance sheet banking on the bank lending channel of monetary transmission: Evidence from South Asia",
    abstract = "Based on a panel data set for 114 South Asian commercial banks, we find that off-balance sheet banking reduces the effectiveness of the bank lending channel of monetary transmission. That is, banks with high exposure to off-balance sheet activities are able to insulate their loan supply against a monetary policy shock thus creating a buffering effect on monetary transmission. We also suggest that these effects are substantial for small, highly-liquid and well-capitalised banks. The buffering effect of off-balance sheet banking on monetary transmission raises important policy issues, particularly with regard to the effectiveness of monetary policy and the definitions of monetary aggregates.",
    author = "Anil Perera and Ralston, {Deborah Eileen} and Jayasinghe Wickramanayake",
    year = "2014",
    doi = "10.1016/j.intfin.2013.12.008",
    language = "English",
    volume = "29",
    pages = "195 -- 216",
    journal = "Journal of International Financial Markets, Institutions and Money",
    issn = "1042-4431",
    publisher = "Elsevier",

    }

    TY - JOUR

    T1 - Impact of off-balance sheet banking on the bank lending channel of monetary transmission: Evidence from South Asia

    AU - Perera, Anil

    AU - Ralston, Deborah Eileen

    AU - Wickramanayake, Jayasinghe

    PY - 2014

    Y1 - 2014

    N2 - Based on a panel data set for 114 South Asian commercial banks, we find that off-balance sheet banking reduces the effectiveness of the bank lending channel of monetary transmission. That is, banks with high exposure to off-balance sheet activities are able to insulate their loan supply against a monetary policy shock thus creating a buffering effect on monetary transmission. We also suggest that these effects are substantial for small, highly-liquid and well-capitalised banks. The buffering effect of off-balance sheet banking on monetary transmission raises important policy issues, particularly with regard to the effectiveness of monetary policy and the definitions of monetary aggregates.

    AB - Based on a panel data set for 114 South Asian commercial banks, we find that off-balance sheet banking reduces the effectiveness of the bank lending channel of monetary transmission. That is, banks with high exposure to off-balance sheet activities are able to insulate their loan supply against a monetary policy shock thus creating a buffering effect on monetary transmission. We also suggest that these effects are substantial for small, highly-liquid and well-capitalised banks. The buffering effect of off-balance sheet banking on monetary transmission raises important policy issues, particularly with regard to the effectiveness of monetary policy and the definitions of monetary aggregates.

    U2 - 10.1016/j.intfin.2013.12.008

    DO - 10.1016/j.intfin.2013.12.008

    M3 - Article

    VL - 29

    SP - 195

    EP - 216

    JO - Journal of International Financial Markets, Institutions and Money

    JF - Journal of International Financial Markets, Institutions and Money

    SN - 1042-4431

    ER -