tailieunhanh - A Theoretical and Empirical Assessment of the Bank Lending Channel and Loan Market Disequilibrium in Poland

The third result links this permanent component to monetary authorities behaviour. Recently, Grkaynak, Sack and Swanson (2003) show that the change in expectations of the long-run ináation rate by private agents depend on macroeconomic and monetary surprises. Moreover, the relationship between ináation, interest rates and monetary policy has been studied for a long time and, for example, since the seminal paper of Mankiw and Miron (1986), a signiÖcant number of papers have studied the relationship between monetary policy and the rational expectations theory | A Theoretical and Empirical Assessment of the Bank Lending Channel and Loan Market Disequilibrium in Poland Christophe Hurlin Rafaỉ Kierzenkowski 1 Abstract We study the impact of the bank lending channel and loan market disequilibrium on the efficiency of the monetary policy transmission in Poland since 1994. First we develop a simple credit-augmented model with an interest rate control flexible prices and an imperfect nominal wage indexation. Within this framework we establish that the bank lending channel may amplify but also attenuate the impact of monetary policy shocks on output and prices as compared to the traditional interest rate channel. The variations in the interest rate spread between the loan rate and the central bank s intervention rate are a good indicator when distinguishing between amplification and attenuation effects of monetary policy shocks provided that there is a positive relationship between both rates and that the loan interest rate is a market clearing variable. Second we apply a regime switching framework to the loan market. The results suggest that disequilibrium is a permanent characteristic of the Polish loan market since 1994. Moreover we discuss empirically the impact of any type of disequilibrium in the loan market on the effectiveness of the bank lending channel. We find attenuation effects of the bank lending channel on monetary policy shocks from the beginning of 1996 to August 1998 and on average a neutral effect of this transmission channel from September 1998 to June 2001. 1 This is a revised version of a paper presented at Warsaw School of Economics Chair of Monetary Policy on December 4 2001 and at the National Bank of Poland Research Department on December 11 2001. The authors are grateful to Michal Brzoza-Brzezina Tomasz Chmielewski Maciej Dudek Tomasz Lyziak Boguslaw Pietrzak Zbigniew Polanski Jerzy Pruski Ewa Wrobel Marzena Zaremba and many other participants of both seminars for numerous valuable comments. We would .