Interest Rate and Credit Channels of Monetary Transmission Mechanism: A Study of the Malaysian Experience (January 1996-June 2012)

Interest Rate and Credit Channels of Monetary Transmission Mechanism: A Study of the Malaysian Experience (January 1996-June 2012)

Monetary transmission mechanism as define by Taylor (1995) as a process through which monetary policy decisions are transmitted into changes in income and inflation. Monetary transmission mechanism works through various channels namely interest rate channel, credit channel, exchange rate channel, as...

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Main Author: Noor Maimun, Abdul Wahab
Format: Thesis
Language:eng
eng
Published: 2013
Subjects:
HJ Public Finance
Online Access:https://etd.uum.edu.my/3580/1/s808865.pdf
https://etd.uum.edu.my/3580/7/s808865.pdf
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id my-uum-etd.3580
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institution Universiti Utara Malaysia
collection UUM ETD
language eng
eng
advisor Dahalan, Jauhari
topic HJ Public Finance
spellingShingle HJ Public Finance
Noor Maimun, Abdul Wahab
Interest Rate and Credit Channels of Monetary Transmission Mechanism: A Study of the Malaysian Experience (January 1996-June 2012)
description Monetary transmission mechanism as define by Taylor (1995) as a process through which monetary policy decisions are transmitted into changes in income and inflation. Monetary transmission mechanism works through various channels namely interest rate channel, credit channel, exchange rate channel, asset price channel and expectation channel. A review of the related literature supported that the credit channel to be a more significant monetary transmission channel than the interest rate channel in foreign countries like China, Korea and United States. This project paper investigates the interest rate and credit channels in the monetary transmission mechanism in Malaysia over the period of January 1996 to June 2012 by employing a Vector autoregressive (VAR) approach. It planned to meet two major objectives. Firstly, is to examine the significance influence of overnight policy rate (OPR) and total loans by commercial banks (TL) as channels of monetary transmission mechanism in Malaysia. Secondly, to identify the direction of causality between the variables used in this study which are overnight policy rate, total loans by commercial banks, lending rate and consumer price index. The results show that, overnight policy rate, lending rate, total loans by commercial banks and consumer price index are cointegrated. This study finds conclusive evidence that both channels are important in the monetary transmission mechanism in Malaysia.
format Thesis
qualification_name masters
qualification_level Master's degree
author Noor Maimun, Abdul Wahab
author_facet Noor Maimun, Abdul Wahab
author_sort Noor Maimun, Abdul Wahab
title Interest Rate and Credit Channels of Monetary Transmission Mechanism: A Study of the Malaysian Experience (January 1996-June 2012)
title_short Interest Rate and Credit Channels of Monetary Transmission Mechanism: A Study of the Malaysian Experience (January 1996-June 2012)
title_full Interest Rate and Credit Channels of Monetary Transmission Mechanism: A Study of the Malaysian Experience (January 1996-June 2012)
title_fullStr Interest Rate and Credit Channels of Monetary Transmission Mechanism: A Study of the Malaysian Experience (January 1996-June 2012)
title_full_unstemmed Interest Rate and Credit Channels of Monetary Transmission Mechanism: A Study of the Malaysian Experience (January 1996-June 2012)
title_sort interest rate and credit channels of monetary transmission mechanism: a study of the malaysian experience (january 1996-june 2012)
granting_institution Universiti Utara Malaysia
granting_department Othman Yeop Abdullah Graduate School of Business
publishDate 2013
url https://etd.uum.edu.my/3580/1/s808865.pdf
https://etd.uum.edu.my/3580/7/s808865.pdf
_version_ 1776103620512579584
spelling my-uum-etd.35802023-02-02T03:22:54Z Interest Rate and Credit Channels of Monetary Transmission Mechanism: A Study of the Malaysian Experience (January 1996-June 2012) 2013 Noor Maimun, Abdul Wahab Dahalan, Jauhari Othman Yeop Abdullah Graduate School of Business Othman Yeop Abdullah Graduate School of Business HJ Public Finance Monetary transmission mechanism as define by Taylor (1995) as a process through which monetary policy decisions are transmitted into changes in income and inflation. Monetary transmission mechanism works through various channels namely interest rate channel, credit channel, exchange rate channel, asset price channel and expectation channel. A review of the related literature supported that the credit channel to be a more significant monetary transmission channel than the interest rate channel in foreign countries like China, Korea and United States. This project paper investigates the interest rate and credit channels in the monetary transmission mechanism in Malaysia over the period of January 1996 to June 2012 by employing a Vector autoregressive (VAR) approach. It planned to meet two major objectives. Firstly, is to examine the significance influence of overnight policy rate (OPR) and total loans by commercial banks (TL) as channels of monetary transmission mechanism in Malaysia. Secondly, to identify the direction of causality between the variables used in this study which are overnight policy rate, total loans by commercial banks, lending rate and consumer price index. The results show that, overnight policy rate, lending rate, total loans by commercial banks and consumer price index are cointegrated. This study finds conclusive evidence that both channels are important in the monetary transmission mechanism in Malaysia. 2013 Thesis https://etd.uum.edu.my/3580/ https://etd.uum.edu.my/3580/1/s808865.pdf text eng public https://etd.uum.edu.my/3580/7/s808865.pdf text eng public masters masters Universiti Utara Malaysia Abdul, K., Zulkefly, Wan, N., Wan, A.S., Abdul, K.B. (2010). Bank lending channel of monetary policy: dynamic panel data evidence from Malaysia. University of Munich: Working paper. Agosto. (2003). Bank lending channel and the monetary transmission mechanism: the case of Chile. Central Bank of Chile: Working paper. Ahmad. (2008). Monetary transmission mechanism in Fiji and Papua New Ginue.International Research Journal of Finance and Economies, 15, 1450-2887. Asif, I.A., Noor, A., Yasir, A.M., & Hastam, S. (2005). Transmission mechanism of monetary policy in Pakistan. SBP Research Bulletin, 1(1), 1-23. 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