Monetary policies and bank lending in developing countries: evidence from Sub-Sahara Africa
Creators: name: Modugu, Kennedy
name: Dempere, Juan
Publisher: name: figshare
Year: 2022
Subjects: subject: 150299 Banking, Finance and Investment not elsewhere classified
subject: FOS: Economics and business
subject: 150501 Consumer-Oriented Product or Service Development
subject: 150304 Entrepreneurship
subject: 150201 Finance
subject: 150103 Financial Accounting
subject: 150202 Financial Econometrics
subject: 150203 Financial Institutions (incl. Banking)
subject: 150308 International Business
subject: 150314 Small Business Management
subject: 130203 Economics, Business and Management Curriculum and Pedagogy
subject: FOS: Educational sciences
subject: 140202 Economic Development and Growth
subject: 140303 Economic Models and Forecasting
subject: Economics
subject: 149999 Economics not elsewhere classified
subject: 140207 Financial Economics
subject: 140210 International Economics and International Finance
subject: 140102 Macroeconomic Theory
subject: 140212 Macroeconomics (incl. Monetary and Fiscal Theory)
subject: 140209 Industry Economics and Industrial Organisation
subject: 140213 Public Economics- Public Choice
subject: 140215 Public Economics- Taxation and Revenue
subject: 160401 Economic Geography
subject: FOS: Social and economic geography
subject: 160505 Economic Development Policy
subject: FOS: Political science
subject: 160205 Police Administration, Procedures and Practice
subject: FOS: Law
subject: 160509 Public Administration
subject: 160510 Public Policy

description: <strong>Monetary policies and bank lending in developing countries: evidence from Sub-Sahara Africa</strong> <strong>Abstract</strong>: The purpose of this paper is to examine monetary policies and bank lending in the emerging economies of Sub-Sahara Africa. The dynamic system-generalized method of moments (GMM) that overcomes issues of unobserved period and country-specific effects, as well as potential endogeneity of explanatory variables, is applied in the estimation exercise. The study uses the data for 80 banks across 20 Sub-Saharan African countries from 2010 to 2019. The findings show that expansionary monetary policy such as an increase in money supply stimulates bank lending, while contractionary monetary policies like increase in the monetary policy rates by the central banks lead to credit contraction, albeit a weak effect due to possible underdevelopment of financial markets, institutional constraints, bank concentration and other rigidities in the system characteristic of developing countries that undermine the effectiveness of monetary policy transmission. Capital adequacy ratio and size of economic activities are other variables that significantly influence bank lending channels. Sub-Sahara Africa countries can enhance the effectiveness of monetary policy transmission on bank lending through the effective use of the transmission mechanism of changes in money supply and monetary policy rate. While greater empirical attention has been devoted to the nexus between monetary policies and macroeconomic variables in country-specific studies, the connection between monetary policies and bank lending at an extensive regional or cross-country level is still scanty. For Sub-Saharan Africa, there is a palpable lack of empirical evidence on this. This study, therefore, seeks to fill this gap in a region where the impact of monetary policies on credit intermediation is crucial to the economic diversification efforts of the governments of Sub-Sahara Africa.