Regional Banking Market Structure and Monetary Policy Transmission: Evidence from Russia

Abstract

This paper studies the influence of the regional banking market structure on the transmission of a common monetary policy stance across Russia’s eight federal districts. Using district-level monthly and quarterly panels covering April 2019 to January 2022, I estimate fixed-effects models that interact the Bank of Russia’s key rate with a lagged proxy for district banking concentration. In the full sample, more concentrated districts exhibit stronger short-run responses of short-term corporate lending rates and investment to the key rate. However, this pattern is determined by the upper tail of the concentration distribution and weakens materially once the Northwestern Federal District is excluded. At longer horizons, heterogeneity is weaker: for investment, distributed-lag estimates point more to differences in the timing of adjustment rather than to those in cumulative one-year responses, while for long-term lending rates the evidence is sensitive to the lag structure. Overall, local banking structure appears to matter mainly for short-run differences in sensitivity, and even that evidence is not broadly distributed across districts.