Global financial crisis and its effects on the bank lending channel in the Colombian economy

The objective of this article is to examine the bank lending channel in Colombia for the period 1995-2015, taking into account the repercussions that the 2007 global financial crisis had on it. To this end, the sample is divided into two periods (pre- and post-crisis) and two approaches are used in order to obtain robust results. By using panel data models, it is found that an increase in the reference interest rate of 1% decreases bank lending by 2-3% (regardless of the approach used), which shows the existence of the bank lending channel for the pre-crisis period; likewise, the results found show that this channel has heterogeneous effects on the economy. However, for the post-crisis period, the results lose statistical significance, thus suggesting that the global financial crisis did influence such a channel. These results imply that the Colombian central bank, at the time of making decisions and formulating its monetary policy, should take into account that the final effect on the economy is not the same as that observed before 2007.