Monetary policy transmission through the bank lending channel in Thailand

This paper investigates the strength of the bank lending channel in the transmission of monetary policy in Thailand. Bank behavior is captured by quarterly balance sheet data for ten commercial banks of diverse size for the period 2007-2016. Based on a flexible form profit function, bank supply and demand equations are estimated that capture lending and funding choices. The estimation results are used to derive time-dependent supply and demand elasticities which are then combined with estimates of pass-through from the policy rate to retail rates to simulate the dynamic impact of a monetary tightening on bank portfolio allocations. Due to pass-through differentials among retail interest rates, an increase in the policy rate is shown to raise the cost of loan-production relative to the return on loans, thereby motivating banks to contract their lending. Small banks show a greater degree of loan contraction than large banks because large banks are better able to fund continued lending through debt issuance. Because the Thai economy relies heavily on bank loans, these findings suggest that the bank lending channel is an important conduit for the transmission of monetary policy in Thailand.     

Chinese monetary policy and the banking system

Chinese monetary policy differs from that of many other countries in its use of multiple policy instruments. This paper assesses the effectiveness of some of the instruments employed, using a model of the banking sector and elasticities estimated from Chinese data. We find that direct interest rate changes are a poorer instrument of monetary control in China than changes in reserve requirement ratios and loan-to-deposit ratios. This finding is based on the ambiguous estimated response of deposit demand to such changes, and may help to explain why changes to administered interest rates have been used sparingly as an instrument of Chinese monetary policy. We also find that the ambiguous deposit demand response could pose challenges for the effectiveness of open market operations under interest rate liberalisation, while exchange rate liberalisation is likely to make monetary instruments more powerful.     

The pricing of China stock index options based on monetary policy uncertainty

In the field of option pricing, scholars have been exploring the constant settings of volatility and interest rate ever since the Black-Scholes model was put forward. This research introduces a floating interest rate into the local volatility model, analyzes the model’s pricing effects, and compares them from the aspects of an in-sample pricing error and out-of-sample pricing error respectively using data of CSI (China Securities Index) SH-SZ (Shanghai-Shenzhen) 300 stock index options. The empirical results show that the Surface Stochastic Volatility Inspire model is better than the Stochastic Volatility Inspire model.     

The estimation of monetary policy reaction function in a data-rich environment: The case of Japan

This paper reports the estimates of a monetary policy reaction function for the Bank of Japan in a data-rich environment. There are two main findings. First, a weak identification problem arises in the estimates under the specifications that some previous works employ, though in a data-rich environment it may be possible to avoid this problem. Second, the evidence from the estimates in a data-rich environment suggests that the Bank of Japan only controlled the inflation forecast, and placed no weight on output stabilization directly over the period from November 1988 through February 2001.     

Inflation dynamics and monetary policy transmission in Vietnam and emerging Asia

This paper provides an overview of inflation developments in Vietnam in the years following the doi moi reforms, and uses empirical analysis to answer two key questions: (i) what are the key drivers of inflation in Vietnam, and what role does monetary policy play? and (ii) why has inflation in Vietnam been persistently higher than in most other emerging market economies in the region? It focuses on understanding the monetary policy transmission mechanism in Vietnam, and in understanding the extent to which monetary policy can explain why inflation in Vietnam has been higher than in other Asian emerging markets over the past decade.     

Soft budget constraints, bank capital, and the monetary transmission mechanism

This paper investigates the effect of monetary policy in a situation where soft budget constraint problems prevail in the economy and the bank faces a capital requirement. Under these circumstances, an expansionary monetary policy may increase quantity of bank lending without improving the quality and thus may not stimulate economic activity. On the other hand, in order to solve the problem of soft budget constraint problems and to improve the quality of bank lending, the quantity of bank lending should be decreased. Central authorities need to keep this tradeoff in mind when exercising monetary policy and injecting public funds.     

Impact of monetary policy on exchange market pressure: The case of Nepal

This paper uses a monetary model of exchange market pressure to examine the impact of monetary policy on the Nepalese exchange rate. Using a recently developed estimation technique, impulse indicator saturation, along with general-to-specific modeling, we find that a contractionary monetary policy results in easing of pressure on the exchange rate. The robustness of the results is confirmed using misspecification tests.     

On the hump-shaped output effect of monetary policy in an open economy

Results of empirical research have revealed a characteristic hump-shaped effect of a monetary policy shock on output: The effect of the shock builds to a peak after several months and then gradually dies out. We analyze, in the context of a ‘new open economy macroeconomics’ model, factors that imply a hump-shaped response of output to a monetary policy shock. We find that a hump-shaped effect of a monetary policy shock on output is likely to result if the model features a “catching-up with the Joneses” effect, pricing-to-market behavior of firms, and imperfect international financial market integration. We thank two anonymous referees for very helpful comments. The usual disclaimer applies.     

Towards improved monetary policy in Indonesia

Indonesia's depreciation vastly exceeded that of all other countries hit by the Asian crisis. Indonesia also experienced far higher inflation. This paper argues that there is a close medium to long-term relationship between money growth and inflation in Indonesia, and that this has not been greatly disturbed by the crisis. It argues that the country's disappointing performance in relation to maintaining the value of the rupiah can be explained by the central bank's failure to sterilise the monetary impact on base money of its last-resort lending to the banks. The fundamental lesson is that Bank Indonesia would be well advised to adopt slow and steady growth of base money as the nominal anchor for monetary policy, now that the pre-crisis policy of slow and steady depreciation of the rupiah has been abandoned.     

加强我国公司法人治理结构中的激励与约束机制

本文利用相关分析、Granger因果检验、回归分析三种统计指标分析了CPI与GDP的关系 ,指出CPI作为通货膨胀指标的可行性。要实现CPI的控制目标 ,应以M 2作为货币政策中介目标较为合理     

Macroeconomic stabilization through monetary and fiscal policy coordination: Implications for European Monetary Union

In a two-country model, we consider the implications of monetary and fiscal policy coordination for macroeconomic stabilization. We show that the optimal regime is one of monetary and fiscal policy coordination under flexible exchange rates. In the context of the European Community, this suggests that the desire to fix exchange rates may not be costless. In addition, we show that fiscal coordination requires a relatively high degree of flexibility in fiscal policy. This result suggests that limits on the flexibility of fiscal policies, as suggested in the Delors Report, may hinder macroeconomic stabilization.     

Measuring monetary policy with empirically grounded restrictions: An application to Thailand

This paper studies the effect of monetary policy in Thailand based on structural vector autoregression (SVAR) model. Unlike all existing studies, this paper (i) properly controls for external factors, (ii) uses the identifying restrictions which are specified and justified from empirical evidence and (iii) studies the immediate as well as the short term effect of monetary policy. I find that several important stylized facts on the transmission mechanism of monetary policy need to be revised.     

Bank cooperation and banking policy in a monetary union: A political-economy perspective on EMU

Why do large European banks lobby for monetary union? We show in a game-theoretic model that montary union can trigger a change in the structure of the market for international banking transactions with asymmetric effects on profits: large banks are induced to cooperate internationally and gain from European Monetary Union (EMU), while small banks are likely to lose. Monetary union can be interpreted as a device for large banks to push small banks out of the market for cross-border financial services.     

A role model for China? Exchange rate flexibility and monetary policy in Japan

A substantial number of papers have proposed to allow for more exchange rate flexibility of the Chinese yuan. But few papers have tried to project how Chinese monetary policy will behave under flexible exchange rates. As Japan provides an important role model for China, this paper studies the role of the yen/dollar exchange rate for Japanese monetary policy after the shift of Japan from a fixed to a floating exchange rate regime. In contrast to prior studies, we allow for regime shifts in the impact of the exchange rate on monetary policy. The results show that the exchange rate had a substantial impact on Japanese monetary policy in periods of appreciation. This implies that repeated attempts to soften the appreciation pressure by interest rate cuts have led Japan into the liquidity trap. The economic policy conclusion for China is to keep the exchange rate pegged (to the dollar).     

人民币国际化对货币政策有效性的影响

人民币国际化是否影响货币政策有效性?是人民币国际化程度提高之后货币大规模跨境流动而引起的担忧。文章研究发现,在给定其他因素不变的情况下,人民币国际化程度的提高放大了境外汇率变动对国内经济产出和价格的影响。因此,人民币国际化背景下,中央银行应将境外汇率失衡纳入货币政策的反应函数,反应系数取决于境外利率、产出和价格对境外货币需求的决定系数。理论分析还表明,人民币国际化程度不影响货币政策对国内价格的有效性,而是否影响货币政策对国内经济产出的有效性,则取决于经济结构特征。实证结果表明,目前人民币国际化未对国内利率、产出和价格带来明显冲击,且无论是在M0层次,还是在M2层次,人民币国际化均未明显影响国内货币政策有效性。     

分析中国货币政策的有效性

我国货币政策的最终目标是稳定币值,促进经济稳定增长。中央银行是通过货币政策工具控制和调节中介目标———货币供应量来实现这个最终目标的。本文通过探讨货币是中性还是非中性,货币供应量是内生还是外生,我国货币政策的传导机制是否畅通这三个问题,最终得出了我国货币政策     

Asymmetric monetary policies? the case of Germany and France

How dissimilar are the policy objectives of the Bundesbank and the Banque de France and have those objectives converged since the conception of the EMS? We address these questions by estimating objective functions for the flexible-exchange-rate and the EMS periods. Vector autoregressions are used to characterize the economic environment and an inverse control methodology is used to infer the objectives of the central banks. We find that the Bundesbank's policy actions are compatible with its having consistently placed a high weight on the objective of price stability. The Banque de France on the other hand appears to have considered output stability to be an important target in the early EMS period. After a major French policy shift in 1982 the objectives of two Central Banks appear to be quite similar.     

Micro-aspects of monetary policy: Lender of Last Resort and selection of banks in pre-war Japan

This paper explores how the Bank of Japan (BOJ) dealt with the trade-off between stability of the financial system and the moral hazard of banks in pre-war Japan. The BOJ concentrated Lender of Last Resort (LLR) loans with those banks that had an established transaction relationship with the BOJ. At the same time, the BOJ carefully selected its transaction counterparts, and did not hesitate to end the relationship if the performance of a counterpart declined. Further, the BOJ was selective in providing LLR loans. Through this policy, the BOJ could avoid the moral hazard that the LLR policy might otherwise have incurred.     

The leading indicator property of the term spread and the monetary policy factors in Japan

Many studies have observed the leading indicator property of the term spread (LIPTS), which indicates that the term spread—the difference between long- and short-term interest rates—has information on future economic conditions. We examine whether this property is related to monetary policy or not by using Japanese monthly data with consideration for structural changes. Results of structural change tests show that the term spread has predictive ability for the future economic activity from 1982:4 to 1997:8. Decomposing the term spread into three parts; one is explained by past monetary policy shocks, another is explained by expected future call rates and the other is the remaining part, we find that all three parts are significantly related to the future economic growth rate. Hence, we find that the monetary policy plays an important role for the LIPTS.