The role of banks in the monetary policy transmission in the new EU member states

This paper aims to enrich the knowledge on the monetary policy transmission mechanism in the new European Union member states with empirical evidence on the impact of monetary policy on bank lending. This work is based on individual bank balance sheet data and covers a sample of commercial banks from 10 Central and Eastern European countries over the period 1998-2006. We follow the approach suggested by Kashyap and Stein (1995) and control for cross-section heterogeneities among banks. The results indicate the existence of asymmetric adjustment of loan quantities with respect to specific bank characteristics. Our findings indicate the existence of a functioning bank-lending channel through small banks. This applies in the short-run to several, but not all, of the analysed banks.