The link between monetary policy and banks lending behaviour: The ghanaian case

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18 Citations (Scopus)

Abstract

Purpose - The study examines whether bank lending is constrained by monetary policy in Ghana. Design/methodology/approach - The study uses panel cross sectional data covering the period from 1998 to 2004 from the database of Bank of Ghana, ISSER and International Financial Statistics of IMF. The bank loan is represented by freely allocated bank loan which is presumably more sensitive to changes in monetary policy. Changes in money supply and central bank' prime rate is a proxy of monetary policy. Findings - The study reveals that Ghanaian banks lending behaviours are affected significantly by the country's economic activities and changes in money supply. The results of this study also support previous studies that the central bank's prime rate and inflation rate negatively but statistically insignificantly affect banks lending. With the firm level characteristics, the study reveals that bank size and liquidity significantly influence banks' ability to extend credit when demanded. Originality/value - The main value of this study is the identification of the monetary policy factors that influence bank lending behaviour in Ghana.

Original languageEnglish
Pages (from-to)38-48
Number of pages11
JournalBanks and Bank Systems
Volume1
Issue number4
Publication statusPublished - 2006
Externally publishedYes

Keywords

  • Bank lending
  • Behaviour
  • Ghana
  • Monetary policy

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