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Is the Lending Channel of Monetary Policy Dominant in Australia?

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  • Tomoya Suzuki

Abstract

The transmission process of monetary policy is a longstanding macroeconomic issue. The lending view is that a monetary tightening affects aggregate demand by shifting the supply schedule of bank loans left. The contraction of bank loans does not necessarily mean a shift of the supply schedule. Therefore, testing the lending view requires the identification of the shifts of the demand and supply schedules in the bank loan market. This paper employs an original approach, finding that the lending channel is not dominant in Australia. The paper also examines features of Australian banks’ behaviour which make the lending channel less dominant.

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  • Tomoya Suzuki, 2004. "Is the Lending Channel of Monetary Policy Dominant in Australia?," The Economic Record, The Economic Society of Australia, vol. 80(249), pages 145-156, June.
    • Handle: RePEc:bla:ecorec:v:80:y:2004:i:249:p:145-156
    DOI: 10.1111/j.1475-4932.2004.00169.x
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    Cited by:

    1. Tomoya Suzuki, 2008. "International Credit Channel Of Monetary Policy: An Empirical Note," Australian Economic Papers, Wiley Blackwell, vol. 47(4), pages 396-407, December.
    2. Jarkko Jääskelä, 2007. "More Potent Monetary Policy? Insights from a Threshold Model," RBA Research Discussion Papers rdp2007-07, Reserve Bank of Australia.
    3. Matthew Read, 2023. "Estimating the Effects of Monetary Policy in Australia Using Sign‐restricted Structural Vector Autoregressions," The Economic Record, The Economic Society of Australia, vol. 99(326), pages 329-358, September.
    4. David Jacobs & Vanessa Rayner, 2012. "The Role of Credit Supply in the Australian Economy," RBA Research Discussion Papers rdp2012-02, Reserve Bank of Australia.
    5. Abdul Majid, Muhamed Zulkhibri, 2010. "Bank-characteristics, lending channel and monetary policy in Malaysia: evidence from bank-level data," MPRA Paper 30052, University Library of Munich, Germany.
    6. Mai, Nhat Chi, 2014. "Monetary transmission mechanism analysis in a small, open economy: the case of Vietnam," OSF Preprints ybc8p, Center for Open Science.
    7. James Bishop & Peter Tulip, 2017. "Anticipatory Monetary Policy and the 'Price Puzzle'," RBA Research Discussion Papers rdp2017-02, Reserve Bank of Australia.
    8. Adebayo Augustine Kutu & Harold Ngalawa, 2016. "Monetary Policy Shocks and Industrial Sector Performance in South Africa," Journal of Economics and Behavioral Studies, AMH International, vol. 8(3), pages 26-40.
    9. Mansur, Alfan & Liu, Yichang & Zaman, Kazi Arif Uz, 2015. "Portfolio Shocks and the Dynamics of the Real Economy of Australia (1980-2014): A Structural Vector Autoregressive Model Approach," MPRA Paper 93992, University Library of Munich, Germany, revised 17 May 2015.
    10. Renée Fry & James Hocking & Vance L. Martin, 2008. "The Role of Portfolio Shocks in a Structural Vector Autoregressive Model of the Australian Economy," The Economic Record, The Economic Society of Australia, vol. 84(264), pages 17-33, March.
    11. El Alaoui, Abdelkader O. & Jusoh, Hashim Bin & Yussof, Sheila Ainon & Hanifa, Mohamed Hisham, 2019. "Evaluation of monetary policy: Evidence of the role of money from Malaysia," The Quarterly Review of Economics and Finance, Elsevier, vol. 74(C), pages 119-128.
    12. Benjamin Beckers, 2020. "Credit Spreads, Monetary Policy and the Price Puzzle," RBA Research Discussion Papers rdp2020-01, Reserve Bank of Australia.
    13. Tim Atkin & Gianni La Cava, 2017. "The Transmission of Monetary Policy: How Does It Work?," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 01-08, September.
    14. Birgül Cambazoğlu & Hacer Simay Karaalp, 2013. "The External Finance Premium and the Financial Accelerator: The Case of Turkey," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 6(1), pages 103-121, April.
    15. Tuan Phan, 2014. "Output Composition of the Monetary Policy Transmission Mechanism: Is Australia Different?," The Economic Record, The Economic Society of Australia, vol. 90(290), pages 382-399, September.
    16. Mwankemwa, Lusajo P. & Mlamka, Bonaventura, 2022. "Effects of Monetary Policy on Bank’s Credit Dynamics in Tanzania," African Journal of Economic Review, African Journal of Economic Review, vol. 10(2), March.
    17. Yu Hsing, 2013. "Test of the Bank Lending Channel: The Case of Australia," Economics Bulletin, AccessEcon, vol. 33(4), pages 2575-2582.
    18. Liu, Luke, 2011. "Monetary policy, bank size and bank lending: Evidence from Australia," MPRA Paper 35033, University Library of Munich, Germany.
    19. Leon Berkelmans, 2005. "Credit and Monetary Policy: An Australian SVAR," RBA Research Discussion Papers rdp2005-06, Reserve Bank of Australia.
    20. Jeremy Lawson & Daniel Rees, 2008. "A Sectoral Model of the Australian Economy," RBA Research Discussion Papers rdp2008-01, Reserve Bank of Australia.
    21. liu, luke, 2012. "Monetary policy, bank size and bank lending: evidence from Australia(new version)," MPRA Paper 37489, University Library of Munich, Germany.

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