Identifying the bank lending channel in a small open economy

Jui-Chuan Della Chang ()
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Jui-Chuan Della Chang: Department of Applied Economics, National Chiayi University

Economics Bulletin, 2013, vol. 33, issue 2, 1632-1640

Abstract: This paper attempts to provide an alternative method of identifying the bank lending channel in a small open economy at the aggregate level, with emphasis on the degree of the asset substitutability. By testing the long-run relationships underlying a general equilibrium model, our results show that, in the Canadian economy, the bank lending channel plays a role during the financial regulatory period (1970:Q3-1988:Q1) but becomes ineffective during the deregulated period (1988:Q2-2006:Q2). Our findings confirm the prediction of the theory that change in Canadian financial structure matters for change in its transmission of monetary policy.

Keywords: Bank lending channel; Monetary policy; Small open economy (search for similar items in EconPapers)
JEL-codes: E4 E5 (search for similar items in EconPapers)
Date: 2013-06-25
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