What Drives Bank Lending in Domestic and Foreign Currency Loans in a Small Open Transition Economy with Fixed Exchange Rate? The Case of Macedonia

This paper investigates two different bank loan supply functions and their determinants according to the currency of bank loans in the Republic of Macedonia. There is robust statistical evidence in favour of the existence of a bank lending channel through foreign currency loans and the foreign reference interest rate. This suggests that the impact of domestic monetary policy over the bank lending channel is limited. The most significant bank-specific characteristic for the foreign currency loan supply function is bank size, whereas for the domestic currency loans no bank-specific variable plays a significant role.