How Monetary Policy Affects the Lending and Economic Activity in a Banking System with Excess Liquidity

Abstract

Research purpose. The purpose of this paper is to examine the efficiency of the transmission mechanism of the monetary policy in a banking system with excess liquidity. More specifically, it aims to examine how the interest rates of the central bank bills and inflation rate affect total lending and the overall economic activity in the country. For this purpose, the analysis is based on the case of the Republic of North Macedonia, whose banking system has exhibited excess liquidity in the past decade.

Keywords

• interest rates of the central bank bills
• inflation
• total lending
• real gdp
• monetary policy
• e43
• e31
• e51
• e52