An Assessment of the Effects of Monetary Policy Shocks in the Face of Local and International Banks in Perspective

Abstract

This work assesses the impact of monetary policy shocks on the extension of bank credit by local banks and foreign banks in general. We however employ the impulse response functions and the variance decomposition analysis as part of our study in assessing the responses of these types of extension of credit to monetary policy shocks. Our work will enable us reveal whether or not foreign banks react negatively to monetary policy shocks? This is will however enable us to ascertain if indeed foreign banks will not not abandon the domestic market in the face of economic distress or crisis. We will further assess the somewhat different responses in terms of the balance sheet items regarding these banks, the repercussions, more especially on monetary policy employment and the extent to which risk is managed within the banking environment.

Keywords: international and local banks, impulse response functions, variance decomposition analysis VECM, Monetary policy

JEL Classification: E00, E02, G28