Author : Saswati Mahapatra
Publisher :
ISBN 13 : 9781109671742
Total Pages : pages
Book Rating : 4.6/5 (717 download)
Book Synopsis Significance of Domestic Loans in a Small Open Economy by : Saswati Mahapatra
Download or read book Significance of Domestic Loans in a Small Open Economy written by Saswati Mahapatra and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation examines the long-run effects of money and loan market shocks in an open economy credit-view model. The empirical analysis uses data from seven countries: Australia, Canada, France, Germany, Italy, Japan, and the UK. Credit-view models assume that a separate market for domestic loans exists and there are three financial assets: money, bonds, and loans. In this dissertation, first, the existence of a separate market for domestic loans or a domestic lending channel is tested using the Johansen cointegration technique. Second, the structural vector error correction model is used to analyze the long-run effects of five economic shocks: the money multiplier, the monetary base, money demand, loan demand, and loan supply. Impulse responses generated using structural vector error correction models (SVECM) are used to test the comparative static findings of an open economy credit-view model. A key result of the comparative static findings is that a change in the money multiplier affects the real exchange rate in the long run, whereas a change in the monetary base is neutral in the long run. Finally, this study uses the commodity and credit curve to test if the money multiplier is neutral with respect to the real exchange rate. This dissertation study supports the existence of a separate domestic lending channel within Japan, France, and Germany. Based on impulse response functions, a change in the money multiplier affects the long-run real exchange rate only in the case of Japan.