Time: 13:00-15:00 (UK Time), Wednesday, 31 May 2023
Presenters: Dr Lucy Barros and Dr Rosen Chowdhury, Swansea University
Chair: Professor Victor Murinde, SOAS University of London
Online Venue: Click here to join the seminar on Microsoft Teams (For any inquiry about how to join the online seminar, please contact Dr. Athina Petropoulou: ap102@soas.ac.uk)

Abstract
The bank lending channel (BLC) plays a pivotal role in propagating monetary policy shocks for emerging and developing economies. However, the exact operation of the BLC in either moderating or accelerating the effects of monetary policy during periods of geopolitical risk has not been examined much. Literature that does look at the BLC is fraught with methodological issues, including simultaneity and inference problems caused by unaccounted breaks in the data generation process. This paper argues that monetary policy shocks, of the same magnitude, can have asymmetric implications via a state dependent BLC, particularly during high and low levels of geopolitical risk. We test this hypothesis for Turkey using a two-stage approach, using both aggregate and disaggregate bank balance sheet data. In the first stage a structural non-linear local projection model is employed to examine the state dependence. Results suggest that the magnitude of the BLC is contingent upon the state of geopolitical risk, with a one standard deviation expansionary monetary policy shock producing a significant effect only in low geopolitical risk periods. In the second stage, employing the Double-D GMM estimator and bank specific heterogeneity we find less capitalised banks are more prone to geopolitical risk compared to well capitalized ones. 

Co-author: Dr Dilshad Jahan, Swansea University

Presenters

Dr Lucy Barros is a lecturer in Economics at Swansea University. Her research covers applied macroeconomics, economic growth and political economy. She is a deputy director of the Centre for Research in Macroeconomics and Macro-Finance, and associate editor at Open Economies Review (Springer).  

Lucy has published on the drivers of innovation, productivity growth and regional inequality dynamics, looking at public finance and banking in this context. She works with both estimated DSGE models and applied econometric methods. Some of her work from the ESRC-funded project, “Shadow Banking and the Chinese Economy: A Micro to Macro Modelling Framework” was presented recently at the American Economics Association ASSA 2023 Annual Meeting, and other papers have appeared in Regional Studies and Economic Modelling among other international journals. 

Lucy holds a PhD in Economics from Cardiff University and is a graduate of Oxford University. She has done policy work at the UK Department of BEIS (formerly BIS). 

Dr Rosen Chowdhury is a lecturer in Economics at Swansea University's School of Social Sciences and specialises in Monetary economics and Econometrics. Before joining Swansea University, Rosen was a research fellow in University of St Andrews. He holds a PhD in Economics from University of Dundee and an MSc from University of Nottingham.  

Rosen's research interests include bank-centric monetary transmission mechanism channels, inflation dynamics applied econometrics and real estate economics. He is also interested in time series (structural breaks in data generation processes, switching models) and spatial econometric theory. He has published in various journals including Journal of Macroeconomics, Scottish Journal of Political Economy, International Journal of Finance and Economics and Journal of European Real Estate Research. He is a deputy director of the Centre for Research in Macroeconomics and Macro-Finance at Swansea University, and is currently working on a collaborative project with the University of Dhaka evaluating Monetary Policy in Bangladesh.