Bank efficiency has little effect on Chinese monetary policy – Finnish paper

Chinese banks with very high or low loan-to-deposit ratios are most affected, researchers find

The Bank of Finland

A working paper published by the Bank of Finland tests two competing hypotheses about banks’ relation to monetary policy against data from China.

In Does bank efficiency affect the bank lending channel in China?  Zuzana Fungáčová, Eeva Kerola and Laurent Weill look at data on 175 Chinese banks from 2006 to 2017.

The first hypothesis is that efficient banks bolster monetary policy’s effectiveness, as their lending is more sensitive to policy changes. The second argues that as efficient banks

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