This paper examines the relevance of the bank lending channel of
monetary policy in Egypt using bank-level data. Previous empirical
studies in Egypt that used macro-level data have not supported the
relevance of the bank lending channel. However, using a sample of 32
commercial banks for the period from 1998 until 2011 and a dynamic panel
GMM technique, the empirical findings revealed the relevance of the
bank lending channel of monetary policy in Egypt. Moreover, there is a
heterogeneity effect of monetary policy on bank loans according to bank
size, in which the small banks are more affected during a monetary
contraction than larger banks. This finding signals that the monetary
authorities in Egypt should take cognizance of the stability of interest
rates in order to stabilize the bank loan supply. [ABSTRACT FROM
AUTHOR]