The Bank Credit Transmission Channel of Monetary Policy in Australia

Wensheng Lin and Yang Cheng

International Journal of Financial Economics, 2016, vol. 5, issue 2, 61-65

Abstract: This paper intends to test for the existence of credit channel of monetary policy in Australia using aggregate seasonal data from 1994.1 to 2011.4. Based upon Johansen trace test, two co integrating relationships are found and can be identified respectively as loan demand and supply functions. With the tests for a number of exclusion and exogeneity restrictions, the paper concludes that loan supply is negatively related to interbank cash rate, suggesting the existence of credit channel of monetary policy in Australia. Furthermore, a shortterm dynamic analysis shows RBA plays an important role in equilibrium-correcting in the supply of loan. And inflation rate is also found to be equilibrium-correcting in the long run supply equation.

Keywords: Monetary policy; Bank loan; Transmission channel (search for similar items in EconPapers)
Date: 2016
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