The Role Of Banks In Monetary Policy Transmission: Empirical Evidence From Russia

This paper focuses on the role of the banking sector in monetary policy transmission in an emerging economy with a rapidly developing financial system. Specifically, the authors examine whether the central bank's monetary policy stance affects banks' lending behavior. Based on a comprehensive quarterly dataset on all Russian banks from 1Q1999 to 1Q2007, they find evidence for the existence of a bank lending channel in Russia. Contrary to several studies on developed economies, the level of a bank's capitalization matters for the transmission process. Better capitalized banks are less likely to adjust their lending practices following a change in the monetary policy stance.