Table 8 Impact of monetary policy on...

Table 8

Impact of monetary policy on bank returns

Variable	ROADV		ROI
	OLS	GMM	OLS	GMM
Credit-deposit ratio (CDR)	−0.01^**	−0.01^**	−0.001	−0.002^***
Credit-deposit ratio (CDR)	(0.00)	(0.00)	(0.00)	(0.00)
Ratio of deposits to total liabilities (RD)	0.01	0.01	0.01	0.01
Ratio of deposits to total liabilities (RD)	(0.01)	(0.01)	(0.01)	(0.01)
Ratio of priority sector advances to total advances (PSR)	−0.001	−0.001	0.01	0.01
Ratio of priority sector advances to total advances (PSR)	(0.01)	(0.01)	(0.01)	(0.01)
Capital adequacy ratio (CAR)	−0.03^***	−0.03^***	−0.03^***	−0.03^***
Capital adequacy ratio (CAR)	(0.01)	(0.01)	(0.01)	(0.01)
Ratio of non-interest income to total assets (NITA)	0.11	0.11	−0.34^***	−0.34^***
Ratio of non-interest income to total assets (NITA)	(0.09)	(0.09)	(0.07)	(0.07)
Ratio of intermediation cost to total assets (OICTA)	0.25^***	0.25^***	0.43^***	0.43^***
Ratio of intermediation cost to total assets (OICTA)	(0.09)	(0.09)	(0.08)	(0.08)
Ratio of operating profits to total assets (OPPTA)	0.31^***	0.31^***	0.38^***	0.38^***
Ratio of operating profits to total assets (OPPTA)	(0.06)	(0.06)	(0.05)	(0.05)
Gross domestic product growth (GDPGR)	−0.13^***	−0.13^***	−0.05^***	−0.05^***
Gross domestic product growth (GDPGR)	(0.02)	(0.02)	(0.02)	(0.02)
Inflation (INFL)	0.23^***	0.23^***	−0.07^***	−0.07^***
Inflation (INFL)	(0.01)	(0.01)	(0.01)	(0.01)
Cash reserve ratio (CRR)	−0.52^***	−0.52^***	−0.22^***	−0.22^***
Cash reserve ratio (CRR)	(0.03)	(0.03)	(0.03)	(0.03)
Statutory liquidity ratio (SLR)	−0.05	−0.05	−0.01	−0.01
Statutory liquidity ratio (SLR)	(0.04)	(0.04)	(0.03)	(0.03)
Repo rate (RR)	−0.31^***	−0.31^***	−0.12^***	−0.12^***
Repo rate (RR)	(0.02)	(0.02)	(0.02)	(0.02)
Bank rate (BR)	0.01	0.01	0.02	0.02
Bank rate (BR)	(0.03)	(0.03)	(0.02)	(0.02)
Treasury bill rate (TBR)	0.32^***	0.32^***	0.08^***	0.08^***
Treasury bill rate (TBR)	(0.03)	(0.03)	(0.03)	(0.03)
Intercept	10.35^***	10.35^***	8.35^***	8.35^***
Intercept	(0.97)	(0.97)	(0.94)	(0.94)
R-squared	0.83	0.83	0.59	0.59
Adj R-squared	0.8	0.8	0.54	0.54
R-squared (between)	0.0409	0.0409	0.03
D-W stat	1.25	1.25	1.43	1.43
VIF range	1.22–4.72	1.22–4.72	1.19–4.80
Fixed effects	Yes	Yes	Yes	Yes
Cross sections	65	65	65	65
Observations	715	715	715	715

Variable	ROADV		ROI
	OLS	GMM	OLS	GMM
Credit-deposit ratio (CDR)	−0.01^**	−0.01^**	−0.001	−0.002^***
Credit-deposit ratio (CDR)	(0.00)	(0.00)	(0.00)	(0.00)
Ratio of deposits to total liabilities (RD)	0.01	0.01	0.01	0.01
Ratio of deposits to total liabilities (RD)	(0.01)	(0.01)	(0.01)	(0.01)
Ratio of priority sector advances to total advances (PSR)	−0.001	−0.001	0.01	0.01
Ratio of priority sector advances to total advances (PSR)	(0.01)	(0.01)	(0.01)	(0.01)
Capital adequacy ratio (CAR)	−0.03^***	−0.03^***	−0.03^***	−0.03^***
Capital adequacy ratio (CAR)	(0.01)	(0.01)	(0.01)	(0.01)
Ratio of non-interest income to total assets (NITA)	0.11	0.11	−0.34^***	−0.34^***
Ratio of non-interest income to total assets (NITA)	(0.09)	(0.09)	(0.07)	(0.07)
Ratio of intermediation cost to total assets (OICTA)	0.25^***	0.25^***	0.43^***	0.43^***
Ratio of intermediation cost to total assets (OICTA)	(0.09)	(0.09)	(0.08)	(0.08)
Ratio of operating profits to total assets (OPPTA)	0.31^***	0.31^***	0.38^***	0.38^***
Ratio of operating profits to total assets (OPPTA)	(0.06)	(0.06)	(0.05)	(0.05)
Gross domestic product growth (GDPGR)	−0.13^***	−0.13^***	−0.05^***	−0.05^***
Gross domestic product growth (GDPGR)	(0.02)	(0.02)	(0.02)	(0.02)
Inflation (INFL)	0.23^***	0.23^***	−0.07^***	−0.07^***
Inflation (INFL)	(0.01)	(0.01)	(0.01)	(0.01)
Cash reserve ratio (CRR)	−0.52^***	−0.52^***	−0.22^***	−0.22^***
Cash reserve ratio (CRR)	(0.03)	(0.03)	(0.03)	(0.03)
Statutory liquidity ratio (SLR)	−0.05	−0.05	−0.01	−0.01
Statutory liquidity ratio (SLR)	(0.04)	(0.04)	(0.03)	(0.03)
Repo rate (RR)	−0.31^***	−0.31^***	−0.12^***	−0.12^***
Repo rate (RR)	(0.02)	(0.02)	(0.02)	(0.02)
Bank rate (BR)	0.01	0.01	0.02	0.02
Bank rate (BR)	(0.03)	(0.03)	(0.02)	(0.02)
Treasury bill rate (TBR)	0.32^***	0.32^***	0.08^***	0.08^***
Treasury bill rate (TBR)	(0.03)	(0.03)	(0.03)	(0.03)
Intercept	10.35^***	10.35^***	8.35^***	8.35^***
Intercept	(0.97)	(0.97)	(0.94)	(0.94)
R-squared	0.83	0.83	0.59	0.59
Adj R-squared	0.8	0.8	0.54	0.54
R-squared (between)	0.0409	0.0409	0.03
D-W stat	1.25	1.25	1.43	1.43
VIF range	1.22–4.72	1.22–4.72	1.19–4.80
Fixed effects	Yes	Yes	Yes	Yes
Cross sections	65	65	65	65
Observations	715	715	715	715

Note(s): We report the results of the Panel Regression (linear) models of the baseline specification using the bank return measures (ROADV and ROI) as the dependent variables. We present the results of the Panel Least Squares (PLS) with fixed effects (cross-section weights (PCSE) standard errors and covariance) and Generalized Methods of Moments (GMM) with the coefficient values marked with significance levels in the first row, followed by the standard errors (in parenthesis) in the second row. Asterisks ^*** and ^** indicate significance levels at 1 and 5%, respectively

Source(s): Authors’ own calculations

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