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Does Monetary Policy Regime Determine the Nature of the Money Supply?: Evidence from Seven Countries in the Asia-Pacific Region

Author

Listed:
  • Chai, Hee-Yul

    (Kyonggi University)

  • Hahn, Sang B.

    (Kyonggi University)

Abstract

This paper tests empirically the causal relationship between bank loans and the monetary base before and after the adoption of inflation targeting in seven Asia-Pacific countries using Toda-Yamamoto Granger non causality test and the bootstrap test for causality. The most striking finding is that the bank loans Granger cause the monetary base during the inflation targeting period in all the countries, except Japan, which was under the influence of the quantitative easing, whereas the causality appeared diverse before the inflation targeting regime. This result implies the need for the policy makers to take the endogenous nature of the money supply into account in the modern economy.

Suggested Citation

  • Chai, Hee-Yul & Hahn, Sang B., 2018. "Does Monetary Policy Regime Determine the Nature of the Money Supply?: Evidence from Seven Countries in the Asia-Pacific Region," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 22(2), pages 217-239, June.
    • Handle: RePEc:ris:eaerev:0343
    DOI: 10.11644/KIEP.EAER.2018.22.2.343
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    Cited by:

    1. Pawe³ Œliwiñski, 2023. "Endogenous money supply, global liquidity and financial transactions: Panel evidence from OECD countries," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 18(1), pages 121-152, March.
    2. van Eeghen, Piet-Hein, 2021. "Funding money-creating banks: Cash funding, balance sheet funding and the moral hazard of currency elasticity," International Review of Financial Analysis, Elsevier, vol. 76(C).

    More about this item

    Keywords

    Endogenous Money Supply; Money Multiplier; Monetary Policy Regime; Granger Causality; Bootstrap Test;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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