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|Title:||Monetary Policy and the Bank Lending Channel: Evidence of Taiwan|
|Keywords:||Bank Lending Channel|
|Issue Date:||2009-09-14 13:32:32 (UTC+8)|
|Abstract:||Most theoretical and empirical literatures have investigated the credit channel of monetary transmission in a closed economy. However, when Taiwan becomes financially more internationalized, little literature can provide economic implication for the credit-channel effect of a monetary policy to the case of Taiwan. Therefore we set up a model with the credit market under an open economy to study the credit channel-effect of monetary policy with the inclusion of foreign assets and debts in the bank’s balance sheet. The main conclusion in our theoretical model is that the effect of a tight monetary policy on bank loans will be reduced in an open economy; furthermore, such effect may make bank loans increase after a contractionary monetary policy. Besides, the empirical evidence also shows that bank loans increase after a contractionary monetary policy with the data of Taiwan.|
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