Research On The Effect Of Bank Competition On Monetary Policy Transmission Through The Bank Lending Channel

With the full liberalization of interest rate control,the gradual relaxation of private capital and foreign capital access control,and a series of market-oriented system reforms in the banking industry,China’s banking competition is intensifying.At the same time,since the COVID-19,monetary policy tools have played an increasingly critical role in the process of restoring national economic development,and the issue of the credit channel of the monetary policy has gradually become a research hotspot.Does the competition in banks affect the transmission of monetary policy credit channels?Based on the data of Chinese listed banks from 2004 to 2021,this paper makes an econometric analysis of the influence of the bank competition on the transmission of monetary policy credit channels.Firstly,Lerner index is used to measure the degree of competition in Chinese banks,then this paper analyzes the trend of the degree of competition in banking since 2004 and the current situation of banks in Different kinds of Equity Structure.The results show that the competition degree of China’s banking industry has first declined and then increased since 2007,and has shown a downward trend in recent years.In comparison of different ownership banks,state-owned banks have the largest market power and the highest degree of monopoly,while urban commercial banks have the smallest market power and the competition is fierce as well.Secondly,based on the Monti Klein model,this paper constructs a theoretical model of effect in the transmission of monetary policy credit channels considering the bank competition.On the basis of analyzing the impact mechanism of bank competition on the transmission of monetary policy credit channels,this paper conducts an empirical test on full samples and heterogeneous sub samples.Meanwhile,this study adds the lagged bank loan growth rate to the model,and validates the conclusion by comparing the results of two-step system GMM and two-step difference GMM methods.The results show that bank competition significantly enhances the effectiveness of monetary policy transmission through the credit channel,and this effect has been amplified since the LPR reform.There are differences in the strengthening effect of competition on the transmission of monetary policy through the credit channel among banks of different market forces,sizes,and levels of liquidity.The mechanism test verifies that bank competition affects the effectiveness of monetary policy transmission through the credit channel through the interest rate sensitivity effect and the transfer cost effect.Finally,based on theoretical analysis and empirical analysis,this paper puts forward suggestions from the aspects of encouraging bank competition,encouraging bank differential development,market-oriented reform,monetary policy implementation,and innovation of monetary policy tools.