The Significance of Monetary Policy Transmission Mechanism in the Sustainable Development of the SAARC Economic Community

The purpose of this study is to examine the monetary policy transmission mechanisms in seven South Asian Association for Regional Cooperation (SAARC) countries to discover the viability of the convergence of the SAARC into a monetary and economic union based on common monetary channels. By employing optimal currency area theory, we used the restricted VAR analysis on the annual data from 1978 to 2017. We find that the money channel response provides proof for the presence of an exchange rate and credit channels. Furthermore, the real sector also responds to changes in fiscal and monetary shocks through the exchange rate and credit channels over short-run to long-run time horizons. This implies that the SAARC is a good candidate due to common exchange rate and credit channels. The function of the variance decomposition and the impulse for forming a monetary and economic union is that they share a coincidental pattern of dynamic reactions of inflation and growth to exogenous shocks. If the SAARC monetary and economic union is created, it will reap overall economic benefits inside and outside of Asia just like the European Union (EU).

EVALUATION OF MONETARY POLICY IN EMU THROUGH CREDIT CHANNELS INTERCONNECTEDNESS: EVIDENCE USING BLS DATA

Credit channel(s) of the monetary policy transmission has not been debated much in the literature especially in the context of the European monetary union (EMU) and the apparent rising fragmentation of the previously much integrated European banking system. This discussion is even more important in the aftermath of the global financial crisis (GFC) and the decade-long European debt crisis (EDC), a number of European countries have been experiencing. This paper attempts to investigate the interconnectedness of credit channels in policy transmission in the context of EMU using bank lending survey (BLS) data for a sample of eight European countries. One of the main contributions of this paper is to use BLS data for the entire 11 credit channels. We use principal component analysis (PCA) to investigate the impact of monetary policy on the interconnectedness structure of credit channels. PCA is conducted both for EMU across channels and sample countries. EFA-orthogonal vector rotation indicates a core versus periphery interconnectedness pattern. The results suggest that the household balance sheet channel, borrower cash flow channel and interest rate channel are the most divergent channels in EMU.

Bank competition and the credit channel of monetary policy: Evidence from an emerging country

Our study provides one of the first examinations in an emerging country on the credit channel of monetary policy transmission under the influence of competition. The study was conducted using a panel data of 30 joint-stock commercial banks in Vietnam in the period of 2008-2017. By applying the DGMM estimation method, we found that the existence of the influence of competition on monetary policy transmission through credit channels. The higher bank competitiveness will make monetary policy transmission via credit channels of commercial banks less effective. Large-scale commercial banks, because of a merger or equity increase, will increase their competitiveness because of increased market share, which will weaken the monetary policy transmission through credit channels. The estimation results from the two methods of competitiveness measurement-the Lerner index and the Boone index–are in a united direction but at different levels.

Multifaceted analysis of credit channels of monetary policy transmission in european monetary union

Η επιρροή των τραπεζών στην οικονομία δεν μπορεί να εξηγηθεί μόνο από το νεοκλασικό κόστος χρήσης κεφαλαίου, καθώς η διαδικασία διαμεσολάβησης στρεβλώνει και τροποποιεί τη μετάδοση της νομισματικής πολιτικής. Η ενσωμάτωση της ασύμμετρης πληροφόρησης του τραπεζικού συστήματος στη μετάδοση της νομισματικής πολιτικής είναι γνωστή ως «πιστωτική άποψη». Έτσι εξηγείται λειτουργία της νομισματικής πολιτικής και προσφέρονται ερμηνείες για την προέλευση, τη σοβαρότητα και τη διάρκεια των κρίσεων από τον χρηματοπιστωτικό τομέα. Αφού εξετάσουμε διεξοδικά τη σχετική βιβλιογραφία, καταλαβαίνουμε ότι, μέχρι στιγμής, κανείς δεν έχει χαρτογραφήσει πλήρως όλα τα πιστωτικά κανάλια της βιβλιογραφία; και δεν έχει εξετάσει συγκεκριμένες διαστάσεις της «πιστωτικής άποψης». Ειδικότερα, η σύγκλιση των πιστωτικών καναλιών, η ισχύς της ώθησης της νομισματικής πολιτικής να επιτύχει σταθεροποίηση σε πολλές αγορές, η διακριτική επίδραση της νομισματικής πολιτικής στον πυρήνα και την περιφέρεια της Ευρώπης από την πιστωτική σκοπιά και η πρακτική εφαρμογή των πιστωτικών καναλιών στις απόφασεις του υπαλλήλων δανείων για τις εγκρίσεις τους. Στο πλαίσιο αυτής της διατριβής, καλύπτουμε την περίοδο 1ου τριμήνου 2003 έως 4ου τριμήνου 2017 με ένα δείγμα χωρών που προέρχεται από τα αρχικά μέλη της ΟΝΕ. Πρωτίστως, αντιμετωπίζουμε το ζήτημα της αλληλεπίδρασης των πιστωτικών καναλιών με την χαρτογράφηση BLS υπό το φως της υπόθεσης πυρήνα έναντι περιφέρειας στην Ο.Ν.Ε. Αυτή η έρευνα ρίχνει φως στην ύπαρξη εθνικών ιδιοσυγκρασιών που μπορεί να μειώσουν την επιρροή μιας κοινής νομισματικής πολιτικής της ΕΚΤ. Επιπλέον, αμφισβητούμε την αποτελεσματικότητα της νομισματικής πολιτικής, όχι μόνο όσον αφορά την ισχύ της να επηρεάζει την παραγωγή και το επίπεδο τιμών, αλλά και την ικανότητά της να εξουδετερώνει τις διαταραχές που προέρχονται από τον πιστωτικό τομέα και να σταθεροποιεί τις αγορές αγαθών, ομολόγων και πίστωσης. Επιπλέον, αντιμετωπίζουμε την υπόθεση πυρήνα έναντι περιφέρειας στο πλαίσιο της μετάδοσης της νομισματικής πολιτικής με ένα ευρύ σύνολο δεδομένων. Αυτό δείχνει τον μοναδικό ρόλο της πίστωσης που εμβαθύνει την κατανόηση μας για την ευθραυστότητα του περιφερειακού τραπεζικού συστήματος. Τέλος, ρωτάμε τους εμπειρογνώμονες του τραπεζικού κλάδου σχετικά με τη σχετική σημασία των μηχανισμών πιστωτικών καναλιών στη διαδικασία αξιολόγησης δανείων.Τα αποτελέσματά μας επιβεβαιώνουν την υπόθεση πυρήνα έναντι της περιφέρειας μέσω της συγκριτικής μελέτης των πιστωτικών καναλιών. Σε ό,τι αφορά τη νομισματική πολιτική, η παραπάνω υπόθεση επιβεβαιώνεται κυρίως μέσω πιστωτικών και χρηματοοικονομικών μεταβλητών καθώς και για όλα τα υπό εξέταση πιστωτικά κανάλια. Η λειτουργία της νομισματικής πολιτικής είναι αποτελεσματική, ειδικά όταν στοχεύει στη σταθεροποίηση της παραγωγής και της πιστωτικής αγοράς, αλλά αναποτελεσματική στην αγορά χρήματος-ομολογιών. Οι συνεντεύξεις των τραπεζικών στελεχών υπογραμμίζει τη σημασία της νομισματικής πολιτικής ως προς την ανάληψη επιτοκιακού κίνδυνο και στο κανάλι μεταβίβασης των επιτοκίων. Οι πολιτικές μας συστάσεις δίνουν έμφαση στη χρήση της νομισματικής πολιτικής ως μέσου για τη σταθεροποίηση των αγορών της πίστωσης και του προϊόντος. Επιπλέον, προτείνουμε την εμβάθυνση της πρωτοβουλίας της Ευρωπαϊκής Τραπεζικής Ένωσης.

The Nexus between Credit Channels and Farm Household Vulnerability to Poverty: Evidence from Rural China

It is well known that finance is at the core of economic activities, and rural finance is an important force for agricultural development, rural economic growth, and farmer income growth, but how rural credit affects vulnerability to poverty of farm households is not yet known. The study on the nexus between the credit channels and vulnerability to poverty can not only realize targeted poverty alleviation but also promote sustainable rural development. This study measures vulnerability to poverty of Chinese farm households by three-stage feasible generalized least squares (FGLS) and tests for the impact of two credit channels on farm household’s vulnerability to poverty based on China Household Finance Survey data. We mainly found that the proportion of structural poverty in western areas is comparatively large, and risky poverty of farm households in eastern areas is relatively serious. The high education cost may be an important factor in farm household poverty; the cost-effectiveness of education is higher than that of earnings. Farm household vulnerability to poverty with folk loans is 0.2% higher than that of farm households without private credit; however, this is not significant. Farm household vulnerability to poverty with bank credit is 0.4% lower than households without bank credit, which is significant. For farm households who have a higher level of vulnerability to poverty, the effect of bank credit on reducing vulnerability to poverty is greater. Moreover, we replaced the vulnerability-to-poverty variable with a more rigid indicator to test the relationship between the credit channels and vulnerability to poverty and got the same results as before.

The long-run environmental impacts of economic growth, financial development, and energy consumption: Evidence from emerging markets

In this study, the long-term interactions between carbon dioxide (CO2) emissions, real gross domestic product, fossil fuel consumption, and financial development are examined for 15 emerging markets during 1980–2014 by using heterogeneous dynamic panel data techniques. Long-run elasticity results show that the environmental Kuznets curve hypothesis is not valid for emerging markets. Besides, long-run findings reveal that fossil fuel energy consumption has a powerful negative impact on the environmental quality of emerging markets. Moreover, long-run findings of emerging markets show that 1% increase in financial development raises CO2 emissions at 0.76% level. Considering empirical findings, emerging markets should tend to use environmentally friendly technologies to avoid the possible environmental problems caused by pollution. Therefore, green energy investors should be supported by possible incentive policies. In addition, emerging markets should turn towards financial regulations, which extend credit channels for clean industries whereby emerging countries could achieve their sustainable development goals.

The credit channels of monetary policy transmission: implications on output and employment in Nigeria

There has been an increasing trend in the unemployment rate despite the growth rate witnessed. Monetary policy is presumed as one of the ways to improve the situation. Likewise, the relationship between monetary policy and employment has generated controversial debates in the literature. Though its connection has been extensively studied, however, the implications of monetary policy in respect to time frame perspectives on employment and output have not been widely addressed in the literature. This study provides evidence on shock effects, long and short-run impacts of monetary policy transmission through the credit channels on output and employment in Nigeria within the period of 1981 to 2016 using the Structural Vector Autoregression and Autoregressive distributed lags (ARDL). Evidence from the forecast error shock showed that variations in monetary policy indicators affect output more than employment in the first two periods; however, it affects employment more afterwards. The ARDL results show no evidence of co-integration when output is used as the dependent variable; conversely, cointegration exists when employment is used as the dependent variable. The monetary policy indicators: money supply, bank deposit liability and interest rate are statistically and economically significant with employment in the long run. In the short run, money supply and interest rate are economically and statistically significant. The findings revealed that the Nigerian government can maximize the long-run benefits of monetary policy through the credit channels on employment. Hence, there is a need for policymakers to look beyond short-run gain and promote long-run employment via monetary policy among others.