How does structural monetary policy affect traditional bank lending?

This paper examines how structural monetary policy (SMP) affects traditional bank lending. We treat banks' participation in inclusive small and micro-enterprise lending (ISMEL) as a plausibly exogenous SMP shock and estimate its effects using a multi-period difference-in-differences (DiD) design complemented by double machine learning (DML). Based on microdata from 110 Chinese banks spanning 2011–2023, we find that SMP significantly reduces traditional lending. However, bank competition attenuates this effect, with the moderating influence particularly pronounced in state-owned and large joint-stock banks with larger asset sizes.