DOES MONETARY POLICY HAS AN ASYMMETRIC EFFECT ON COMMERCIAL BANKS LENDING CHANNEL IN IRAQ

Abstract

The activities of the central bank's monetary policy affect the financial markets, and consequent modifications to the policy could alter the conduct of depositary institutions. This study explores the asymmetric effects of monetary policies on the lending channels of lending channels of commercial banks in Iraq using monthly data from 2005 to 2019. Non-linear autoregressive distributed lag (NARDL) is utilized to evaluate the Asymmetric effect. Monetary policies were proposed using the Interest Rate (IR), Cash Reserve Requirement (RR), and Broad Money Supply (M2). And Bank Credit (BC) was utilized to propose the lending route for commercial banks. The discovery demonstrates a non-linear link between monetary policy and bank credit. In addition, the Bound and Wald tests showed the long and short-term asymmetric impacts of monetary policy on the credit of Iraqi banks. Therefore, it is recommended that Iraqi policymakers evaluate the asymmetrical impacts and positive and negative monetary policy shocks while determining the most suitable strategy for Iraq's economic circumstances.