Impact of monetary policy on bank’s loan supply: bank’s balance sheet approach

Abstract

This study researches the impact of monetary policy onthe supply of bank loan in Vietnam during the period from 2008 to 2012. The impact is examined by using the Generalized Methods of Moments (GMM) approach. The estimation results indicate that monetary policy change has negative impact on the supply of bank loan and the magnitude is different among banks. Bank characteristics i.e. asset size, liquidity, and capitalization depress the negative impact of monetary policy change on the supply of bank loan. The purpose of this study is to hope policy maker take into consideration when using monetary policy to regulate the supply of bank loan in the context that different bank react and absorb the monetary transmission differently.