BANK LENDING CHANNEL IN SLOVENIA

Channels through which monetary policy affects aggregate demand can be divided into three categories: traditional interest rate channel, other asset price channels and credit channel composed of balance sheet channel (named also broad credit channel), bank capital channel and bank lending channel. Banks face troubles in keeping their present or acquiring new financial sources, when central bank tightens its monetary policy. Banks characterized by differences in size, capitalization, liquidity and ownership face different levels of informational asymmetry and are therefore differently affected by changes in monetary policy. If larger, better capitalized, more liquid and/or home owned banks respond weaker to changes in monetary policy it is possible to argue that bank lending channel is effective. This hypothesis is tested on a panel of annual data for individual Slovenian banks using general method of moments. Although evidence of bank lending channel is mixed, results go in a direction where a confirmation of its existence could be given.