English, Article edition: INTERNATIONAL CREDIT CHANNEL OF MONETARY POLICY: AN EMPIRICAL NOTE TOMOYA SUZUKI

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Bookmark: http://trove.nla.gov.au/version/166431
Physical Description
  • article
Language
  • English

Edition details

Title
  • INTERNATIONAL CREDIT CHANNEL OF MONETARY POLICY: AN EMPIRICAL NOTE
Author
  • TOMOYA SUZUKI
Physical Description
  • article
Notes
  • A longstanding macroeconomic issue is how monetary policy affects the real economy. There are economists placing an emphasis on the role of bank lending in monetary transmission. Their view, called the credit view, is that a monetary tightening shifts the supply schedule of bank loans left, thereby forcing bank-dependent borrowers to cut back on expenditures. In the literature, the credit view is typically studied in a closed-economy context. In reality, however, banks make international loans through their overseas branches and subsidiaries. This suggests that the credit view should be studied in an open-economy context. This paper proposes the international credit view: a monetary-policy shock originated in one country propagates to another through banks' reallocation of funds between the two countries. For testing the hypothesis, Australia and New Zealand provide an excellent case to study. This is because Australian-owned banks dominate the banking market in New Zealand. This paper aims to test the international credit view within a framework of vector auto-regression models. A significant and robust finding is that the supply schedule of loans shifts left in New Zealand after a monetary tightening in Australia. Copyright 2008 The Author. Journal compilation 2008 Blackwell Publishing Ltd/​University of Adelaide and Flinders University.
  • RePEc:bla:ausecp:v:47:y:2008:i:4:p:396-407
Language
  • English
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