Analysis of the Bank Lending Channel of Monetary Transmission Functioning in Russia

Bank lending is an important source of financing for economic agents whose expenditures determine aggregate demand. In turn, the activity of banks in the allocation of funds depends on monetary regulation, which also controls the influence of external sector on the economy. In particular, the considerable fluctuations of the exchange rate observed in recent years undoubtedly affect the decisions of economic agents, and therefore, the activities of financial intermediaries - banks. The bank lending channel is most often discussed and been studied extensively by foreign economists but in our country this topic is not developed enough. For this reason, in this paper, an attempt was made to identify the relationship between changes in macroeconomic indicators that reflect the influence of the external sector and the amount of loans. In the first chapter, the approaches of economic schools to studying the mechanism of monetary transmission, and economic models that describe the impact of monetary policy on the economy through a credit channel were outlined. Then, the existing empirical studies were analyzed and the methodology used in this paper was set out. In the third chapter, a model for analyzing the impact of the external economic factors on the supply of loans was tested on the Russian banking sector data. To carry out the analysis, an empirical model from foreign literature, modified for collected data, was used, estimated by a three-step least-squares method suitable for estimating the system of equations. As a result of the evaluation of two specifications of the regression equation system for individuals and non-financial organizations, within the framework of available data and model limitations, a negative relationship was found between the growth of the exchange rate and the amount of loans within the framework of the bank lending channel.