Monetary Policy Transmission in Emerging Asia: The Role of Banks and the Effects of Financial Globalization

Author/Editor:

Nasha Ananchotikul ; Dulani Seneviratne

Publication Date:

September 28, 2015

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Given the heavy reliance on bank lending as the main source of financing in most Asian economies, banks could potentially play a pivotal role in monetary policy transmission. However, we find that Asia’s bank lending channel or, more broadly, credit channel of domestic monetary policy is not very strong at the aggregate level. Using bank-level data for nine Asian economies during 2000–2013, we show that heterogeneity of bank characteristics (e.g., ownership type, financial position), degree of foreign bank penetration of the domestic banking sector, and global financial conditions all have a bearing on the response of domestic credit to changes in domestic monetary policy, and may account for the apparently weak credit channel at aggregate level.

Series:

Working Paper No. 2015/207

Subject:

Bank credit Banking Commercial banks Credit Financial institutions Foreign banks Loans Money

English

Publication Date:

September 28, 2015

ISBN/ISSN:

9781513516233/1018-5941

Stock No:

WPIEA2015207

Pages:

34

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