Author Identifier (ORCID)
Md Harun Ur Rashid: https://orcid.org/0000-0001-7660-9531
Abstract
We offer new insights into how bank efficiency influences the transmission of monetary policy through the bank lending channel (BLC) in an emerging economy context. The study draws on a balanced panel of 29 banks listed on the Dhaka Stock Exchange (DSE), covering the period from 2006 to 2024. We first measure bank efficiency using the non-parametric Data Envelopment Analysis (DEA), which captures both technical efficiency (TE) and scale efficiency (SE). Subsequently, we employ three regression techniques such as Ordinary Least Squares (OLS), Fixed Effects (FE), and the two-step Generalized Method of Moments (GMM) to examine the moderating effects of TE and SE on the relationship between monetary policy instruments—namely, the Money Market Rate (MMR), Treasury Bill Rate (TBR), and Repurchase Agreement Rate (REPO)—and bank lending behaviour. Our findings reveal that banks with higher TE amplify the positive impact of MMR and mitigate the negative effects of TBR, as they effectively manage resources and absorb funding cost shocks. In contrast, banks with higher SE reduce the influence of MMR and exacerbate the contractionary effect of TBR, focusing on cost minimization and margin preservation. The REPO channel shows no significant moderating effect, remaining weak across the models. These findings provide novel evidence that bank efficiency plays a pivotal role in moderating the monetary policy transmission. The study offers important implications for central banks, financial regulators, and policymakers seeking to strengthen the efficacy of monetary transmission by aligning macroeconomic tools with micro-level bank performance dynamics.
Document Type
Journal Article
Date of Publication
12-1-2025
Volume
104
Publication Title
International Review of Economics and Finance
Publisher
Elsevier
School
School of Business and Law
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 License.
Comments
Rashid, M. H. U. (2025). Bank efficiency and monetary policy transmission. International Review of Economics & Finance, 104, 104760. https://doi.org/10.1016/j.iref.2025.104760