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

Anil Perera; Deborah Eileen Ralston; Jayasinghe Wickramanayake

doi:10.1016/j.intfin.2013.12.008

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

Anil Perera
, Deborah Eileen Ralston
, Jayasinghe Wickramanayake

Research output: Contribution to journal › Article › Research › peer-review

30 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 language	English
Pages (from-to)	195 - 216
Number of pages	22
Journal	Journal of International Financial Markets, Institutions and Money
Volume	29
DOIs	https://doi.org/10.1016/j.intfin.2013.12.008
Publication status	Published - 2014

Access to Document

10.1016/j.intfin.2013.12.008

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

SN - 1042-4431

VL - 29

SP - 195

EP - 216

JO - Journal of International Financial Markets, Institutions and Money

JF - Journal of International Financial Markets, Institutions and Money

ER -