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US Credit Spillovers to Small Open Economies : A Proxy-VAR Approach

Author

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  • CHANG, Shian
  • ARAI, Natsuki

Abstract

This paper examines the spillovers of US credit supply to small open economies by focusing on three Asian economies, Korea, Singapore, and Taiwan, from 1999 to 2019.We employ a proxy vector autoregressive model (VAR) to identify credit supply shocks in the US and estimate dynamic responses in these Asian economies. Similar to Mian, Sufi and Verner (2017), we find that output in Asian economies increases in the short run but decreases in the long run in response to a positive credit supply shock. The estimated effects are comparable to the responses to domestic credit expansion.

Suggested Citation

  • CHANG, Shian & ARAI, Natsuki, 2025. "US Credit Spillovers to Small Open Economies : A Proxy-VAR Approach," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 66(1), pages 46-60, June.
    • Handle: RePEc:hit:hitjec:v:66:y:2025:i:1:p:46-60
    DOI: 10.15057/hje.2025003
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    More about this item

    Keywords

    international spillover; US; credit supply; Asian economy; proxy VAR;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • 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
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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