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Monetary Policy Transmission in Emerging Asia; The Role of Banks and the Effects of Financial Globalization

Nasha Ananchotikul and Dulani Seneviratne

No 15/207, IMF Working Papers from International Monetary Fund

Abstract: Given the heavy reliance on bank lending as the main source of financing in most Asian economies, banks could potentially play a pivotal role in monetary policy transmission. However, we find that Asia’s bank lending channel or, more broadly, credit channel of domestic monetary policy is not very strong at the aggregate level. Using bank-level data for nine Asian economies during 2000–2013, we show that heterogeneity of bank characteristics (e.g., ownership type, financial position), degree of foreign bank penetration of the domestic banking sector, and global financial conditions all have a bearing on the response of domestic credit to changes in domestic monetary policy, and may account for the apparently weak credit channel at aggregate level.

Keywords: Indonesia; Japan; Mongolia; Singapore; Sri Lanka; Thailand; Vietnam; Hong Kong Special Administrative Region of China; Korea, Republic of; Monetary transmission mechanism; Asia; Emerging markets; Banks; Loans; Financial systems; Banking sector; Globalization; Monetary policy; Monetary policy transmission, bank lending channel, financial globalization, bank, lending, credit, banking, General, Monetary Policy (Targets, Instruments, and Effects), Other, (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba, nep-ifn, nep-mac, nep-mon and nep-sea
Date: 2015-09-28
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