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The Credit Channel In A Small Open Economy
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Book Synopsis The Effects of Credit Channel in a Small Open Economy with Perfect Capital Mobility by :
Download or read book The Effects of Credit Channel in a Small Open Economy with Perfect Capital Mobility written by and published by . This book was released on with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The credit channel literature has made great strides in recent years, however, much of the literature to date has focused largely on the closed economy. Even some of the literatures are in a framework of an open economy, they only concentrate on the fixed or a quasi-fixed exchange rate regime. Therefore, the aim of this paper is to complete the theoretical framework by extending the Bernanke and Blinder model to the case of an open economy under a floating exchange rate regime. We find that the exchange rates puzzle takes place in our model when the influence from credit channels is very significant. We further to compare the credit channel effects under different models. Moreover, we adopt a cointegration analysis to study the credit channel effect, and the empirical evidences show that the credit channels exist in Taiwan for the sample period during November 1991 to January 2005.
Book Synopsis The Effects of Credit Channel in a Small Open Economy with Perfect Capital Mobility by :
Download or read book The Effects of Credit Channel in a Small Open Economy with Perfect Capital Mobility written by and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Credit Channel of Monetary Policy and Exchange Rate Flexibility in a Small Open Economy by :
Download or read book The Credit Channel of Monetary Policy and Exchange Rate Flexibility in a Small Open Economy written by and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A Macro Model of the Credit Channel in a Currency Union Member by : Issouf Samaké
Download or read book A Macro Model of the Credit Channel in a Currency Union Member written by Issouf Samaké and published by International Monetary Fund. This book was released on 2010-08-01 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper applies and extends a theoretical model built by Agénor and Montiel (2007) by exploring the effectiveness of government bonds and monetary policy in a small, open, credit-based economy with a fixed exchange rate. The model is applied to Benin, a member of a currency union, using a general equilibrium model with stochastic simulation. Model calibration replicates the historical pattern for 1996–2009. Policy experiments simulated an increase in government securities in Benin’s regional market and a cut in the reserve requirement. Simulations produced mixed results. It appears that, among other factors, excess bank liquidity lowers the effectiveness of monetary policy instruments through the credit channel and that government bonds can help mop up excess bank liquidity.
Book Synopsis The Credit Channel in a Small Open Economy by : Jean-Marc Natal
Download or read book The Credit Channel in a Small Open Economy written by Jean-Marc Natal and published by . This book was released on 2004 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis More on Monetary Policy in a Small Open Economy with Imperfect International Capital Mobility: A Credit View by :
Download or read book More on Monetary Policy in a Small Open Economy with Imperfect International Capital Mobility: A Credit View written by and published by . This book was released on with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: A considerable body of theoretical and empirical literature has evaluated the credit channel of monetary transmission. This paper sets up an open-economy model under floating exchange rates with imperfect international capital mobility based on the Bernanke and Blinder model (1988). Employing our model, we show that a change in money supply has different impacts on the economy in many cases compared to the previous literature. The exchange rate puzzle may occur and when the exchange rate puzzle appears, the Fleming proposition is violated. Besides, by means of a cointegration analysis, we empirically verify the particular case of the exchange rate puzzle with the monthly data from May 1984 to January 2005 in Taiwan. Therefore, our empirical evidences can be matched with our theoretical derivations successfully.
Book Synopsis Cross-Border Credit Intermediation and Domestic Liquidity Provision in a Small Open Economy by : Thorvardur T. Olafsson
Download or read book Cross-Border Credit Intermediation and Domestic Liquidity Provision in a Small Open Economy written by Thorvardur T. Olafsson and published by International Monetary Fund. This book was released on 2018-09-11 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a small open economy model where global and domestic liquidity is intermediated to the corporate sector through two financial processes. Investment banks intermediate cross-border credit through interlinked debt contracts to entrepreneurs and commercial banks intermediate domestic savings to liquidity constrained final good producers. Both processes are needed to facilitate development of key production inputs. The model captures procyclical investment bank leverage dynamics, global liquidity spillovers, domestic money market pressures, and macrofinancial linkages through which shocks propagate across the two processes, affecting spreads and balance sheets, as well as the real economy through investment and working capital channels.
Book Synopsis The Credit Channel in a Small, Open Economy by : Huntley Schaller
Download or read book The Credit Channel in a Small, Open Economy written by Huntley Schaller and published by . This book was released on 2007 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial market imperfections - particularly finance constraints - play an important role in modern corporate finance, but relatively little work has been done on the interaction between corporate finance and the broad operation of financial markets. In particular, relatively little has been done on the interaction between corporate finance and monetary policy. In an influential paper, Chevalier and Scharfstein (1996) argue that financial market imperfections can lead to a link between markups and business-cycle fluctuations. The key idea is that financial market imperfections imply that the markup will be more countercyclical. Under imperfect competition, firms face a tradeoff between increasing market share (by keeping prices low today) and earning monopoly profits in the future - or charging higher prices today to boost current profits. Market share is a form of investment, so the optimal tradeoff depends on the discount rate. Finance constrained firms will face a higher shadow discount rate and will therefore reduce investment in market share. A negative shock, such as monetary policy tightening, implies that finance constraints bind more tightly. This implies that constrained firms will charge higher prices (for given marginal cost). In other words, markups will rise for these firms. If the Chevalier-Scharfstein model is correct, contractionary monetary policy should have different implications for the price paths of firms, depending on the extent to which they are affected by financial market imperfections. A contractionary monetary policy shock will cause the balance sheets of financially dependent firms to deteriorate and will cause the supply curves for various types of credit to shift to the left, increasing the shadow discount rate and inducing these firms to increase their markups, implying that their prices will be higher than they would be in the absence of financial market imperfections. This is a potential explanation for macroeconomic price stickiness that is different in character from the standard explanations, such as menu costs or sticky information. We find evidence consistent with the Chevalier-Scharfstein model. In addition, we use the Rajan-Zingales measure of financial dependence to examine other aspects of the response of financially dependent firms to monetary policy.
Book Synopsis Monetary Policy Transmission in Emerging Markets and Developing Economies by : Mr.Luis Brandao-Marques
Download or read book Monetary Policy Transmission in Emerging Markets and Developing Economies written by Mr.Luis Brandao-Marques and published by International Monetary Fund. This book was released on 2020-02-21 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: Central banks in emerging and developing economies (EMDEs) have been modernizing their monetary policy frameworks, often moving toward inflation targeting (IT). However, questions regarding the strength of monetary policy transmission from interest rates to inflation and output have often stalled progress. We conduct a novel empirical analysis using Jordà’s (2005) approach for 40 EMDEs to shed a light on monetary transmission in these countries. We find that interest rate hikes reduce output growth and inflation, once we explicitly account for the behavior of the exchange rate. Having a modern monetary policy framework—adopting IT and independent and transparent central banks—matters more for monetary transmission than financial development.
Book Synopsis Modeling with Macro-Financial Linkages by : Ms.Inci Ötker
Download or read book Modeling with Macro-Financial Linkages written by Ms.Inci Ötker and published by International Monetary Fund. This book was released on 2009-06-01 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a stylized, small, open economy macro model that incorporates an explicit and non-trivial role for financial intermediation. It illustrates how such a model could be used for policy analysis in an emerging market economy where policymakers are concerned about risks associated with rapid credit growth, financial dollarization, and foreign borrowing, while lacking traditional tools to effect monetary policy transmission, and hence could resort to more direct instruments, such as foreign exchange market intervention and regulatory and administrative measures. Calibrating the model to a stylized emerging European economy, the paper simulates real and financial sector implications of various external and policy-related shocks that could be used as input for monetary policy making.
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.
Book Synopsis Credit availability channel of monetary policy in a small open economy by :
Download or read book Credit availability channel of monetary policy in a small open economy written by and published by . This book was released on 1995 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Anatomy of Monetary Policy Transmission in an Emerging Market by : Kodjovi M. Eklou
Download or read book The Anatomy of Monetary Policy Transmission in an Emerging Market written by Kodjovi M. Eklou and published by International Monetary Fund. This book was released on 2023-07-07 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: Monetary policy transmission in EMs has been found to be weak historically due to under-developed financial markets and heavy central bank intervention in FX markets that undermine the exchange rate channel. Against this background, this paper investigates the transmission of monetary policy, including the role of external factors, in Malaysia and highlight findings that could be relevant for other EMs. We find an important role for the credit and the exchange rate channels. Further, we also find a complementary role for policy tools including Foreign Exchange Intervention (FXI) and liquidity tools such as Statutory Reserve Requirement in shaping the transmission of monetary policy. We then explore the spillover effects of external global factors including global monetary policy and global commodity prices on monetary policy transmission in a small open economy such as Malaysia. The results show that while global commodity prices do not impair monetary policy transmission, global monetary policy tightening could complement domestic efforts to achieve price stability by inducing a global disinflation. Finally, monetary policy transmission is delayed and weakened in high inflationary environment, with the implication that more aggressive and preemptive policy actions may be needed in such cases.
Book Synopsis Monetary Policy Transmission in the Euro Area by : Ignazio Angeloni
Download or read book Monetary Policy Transmission in the Euro Area written by Ignazio Angeloni and published by Cambridge University Press. This book was released on 2003-12-04 with total page 515 pages. Available in PDF, EPUB and Kindle. Book excerpt: This 2003 book offers the most systematic analysis available of the impact of European Central Bank monetary policy on the national economies of the Eurozone. Analysing macro and micro-economic evidence, with chapters by central bank economists, including a discussion chapter by eminent macroeconomists, it is an essential contribution to research on the subject.
Book Synopsis Credit Channel and Capital Flows by : Serdar Varlik
Download or read book Credit Channel and Capital Flows written by Serdar Varlik and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Rapid credit growth induced by sudden capital inflows may negatively affect a country's economic performance, with the resulting outflows turning into a financial crisis. The purpose of this study is to determine whether controlling the credit channel of monetary policy could be used as a macroprudential tool to suppress the effects of sudden capital inflows on economic performance for small open economies like Turkey. In this paper, using the Vector Autoregression methodology employed by (Bernanke, S. B., M. Gertler, and M. Watson. 1997. “Systematic Monetary Policy and the Effects of Oil Price Shocks.” Brookings Papers on Economic Activity 1: 91-157), we investigate whether shutting down the credit channel helps reduce the effects of capital inflows. Indeed, empirical evidence from Turkey shows that doing so decreases the effects of capital inflows on imports and industrial production, but further decreases interest rate and prices and further appreciates the domestic currency. Therefore, it may be prudent to support credit control with additional policy tools to prevent a further decrease in interest rate and prices and a further appreciation of the domestic currency.
Book Synopsis Credit Availability Channel of Monetary Policy in a Small Open Economy by : Ying Wu
Download or read book Credit Availability Channel of Monetary Policy in a Small Open Economy written by Ying Wu and published by . This book was released on 1995 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Business Cycles and Monetary Regimes in Emerging Economies by : Federico Mandelman
Download or read book Business Cycles and Monetary Regimes in Emerging Economies written by Federico Mandelman and published by . This book was released on 2014 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: Starting from a variant of the New Keynesian model for a small open economy, I extend the standard credit channel framework to show that the presence of imperfect competition in the banking system propagates external shocks and amplifies the business cycle. This novel modeling of the banking system captures various well-documented facts in developing economies. I show that strategic limit pricing, aimed at protecting retail niches from potential competitors, generates countercyclical bank markups. Markup increments, as a consequence of sudden capital outflows, end up increasing borrowing costs for firms as well as damaging the financial position of firms' balance sheets. The recognition of monopoly power in banking allows the model to account for the relatively high investment volatility registered in emerging countries, even in the presence of debt that is fully denominated in local currency and flexible exchange rates.
