Bank lending and monetary policy: the effects of structural shift in interest rates
AbstractThis paper provides evidence to show that the interest rate regime adopted by the monetary authority plays an important role in determining the effectiveness of the transmission mechanism of monetary policy via bank lending channel using Malaysian data. As part of the strategy to deal with the recent financial crisis, the Malaysian government introduced capital control measures which subsequently led to a structural shift in interest rates. Before the shift, interest rates were relatively high. The contractionary monetary policy achieved desirable results through the bank lending channel. However, responses of bank lending to interest rate changes were limited after the structural shift which characterises a period of low interest rate regime, rendering the bank lending channel ineffective.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 5 (2007)
Issue (Month): 5 ()
Contact details of provider:
Find related papers by JEL classification:
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bernanke, Ben S & Blinder, Alan S, 1992.
"The Federal Funds Rate and the Channels of Monetary Transmission,"
American Economic Review, American Economic Association,
American Economic Association, vol. 82(4), pages 901-21, September.
- Ben Bernanke, 1990. "The Federal Funds Rate and the Channels of Monetary Transnission," NBER Working Papers 3487, National Bureau of Economic Research, Inc.
- Ben S. Bernanke & Alan S. Blinder, 1989. "The federal funds rate and the channels of monetary transmission," Working Papers 89-10, Federal Reserve Bank of Philadelphia.
- Vogelsang, Timothy J., 1997. "Wald-Type Tests for Detecting Breaks in the Trend Function of a Dynamic Time Series," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 13(06), pages 818-848, December.
- Jan Kakes & Jan-Egbert Sturm, 2001.
"Monetary policy and bank lending. Evidence from German banking groups,"
MEB Series (discontinued), Netherlands Central Bank, Monetary and Economic Policy Department
2001-1, Netherlands Central Bank, Monetary and Economic Policy Department.
- Kakes, Jan & Sturm, Jan-Egbert, 2002. "Monetary policy and bank lending:: Evidence from German banking groups," Journal of Banking & Finance, Elsevier, Elsevier, vol. 26(11), pages 2077-2092, November.
- Cover, James Peery, 1992. "Asymmetric Effects of Positive and Negative Money-Supply Shocks," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 107(4), pages 1261-82, November.
- R. Glenn Hubbard, 1994. "Is There a `Credit Channel' for Monetary Policy?," NBER Working Papers 4977, National Bureau of Economic Research, Inc.
- Sylvia Kaufmann & Burkhard Raunig & Helene Schuberth, 2004. "Growth and Stability in the EU," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 100â108.
- Morris Goldstein & Mohsin S. Khan, 1976. "Large versus Small Price Changes and the Demand for Imports (Demande d'importation et modification forte ou faible des prix) (Grandes y pequeÃ±as variaciones de precios y la demanda de importaciÃ³," IMF Staff Papers, Palgrave Macmillan, vol. 23(1), pages 200-225, March.
- Charles S. Morris & Gordon H. Sellon, Jr., 1995. "Bank lending and monetary policy: evidence on a credit channel," Economic Review, Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, issue Q II, pages 59-75.
- Bernanke, Ben & Gertler, Mark, 1995.
"Inside the Black Box: The Credit Channel of Monetary Policy Transmission,"
Working Papers, C.V. Starr Center for Applied Economics, New York University
95-15, C.V. Starr Center for Applied Economics, New York University.
- Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 9(4), pages 27-48, Fall.
- Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc.
- Anita Doraisami, 2004. "From crisis to recovery: the motivations for and effects of Malaysian capital controls," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(2), pages 241-254.
- Jan Kakes, 2000. "Identifying the mechanism: is there a bank lending channel of monetary transmission in the Netherlands?," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 7(2), pages 63-67.
- M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
- Garretsen, Harry & Swank, Job, 1998. "The Transmission of Interest Rate Changes and the Role of Bank Balance Sheets: A VAR-Analysis for the Netherlands," Journal of Macroeconomics, Elsevier, Elsevier, vol. 20(2), pages 325-339, April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley).
If references are entirely missing, you can add them using this form.