Abstract

This study aimed to analyze the structure of the banking and monetary system and to identify effectiveness of channels of transmission of monetary policy. Specifically, in this paper, influence of legal deposit rate and debt to the central bank, as instruments of central bank monetary policy, on the lending channel of monetary transmission was studied in public and private sector banks. Research methodology is based on the use of panel data econometric model. So the annual balance sheet and income statement data for 31 banks over the period 2005 to 2013 was used to estimate the model. The result showed that the legal deposit rate has not significant effect, but the bank debt to central bank has a positive and significant effect on the bank lending behavior in both public and private sector banks that this effect is greater in the case of private sector banks.