The paper examines evidence for a bank-lending channel in Ukraine. Author of the paper uses a panel of bank balance sheet data to estimate the response of bank lending to changes in monetary policy between 1998 and 2003. In particular, researcher segregates banks according to their asset size, capitalization and liquidity standing to test whether lending responses differ depending on the strength of a bank. The main result is that undercapitalized banks are more affected by a monetary policy change than is an average bank, which is consistent with the bank lending channel hypothesis, suggesting that monetary policy can affect deposits of commercial banks forcing them to change lending, which influences the amount of investment in the economy.

Keywords: Monetary policy transmission; Bank-lending channel; Bank funding

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