Title: An empirical comparison of credit channel in emerging markets: evidence from five Asian economies

Authors: Muhamed Zulkhibri

Addresses: Economic Research and Policy Department, Islamic Development Bank, P.O. Box 5925, Jeddah 21432, Saudi Arabia

Abstract: This paper examines the existence of credit channel in five Asian economies namely Malaysia, Indonesia, Thailand, Philippines and Korea. We estimate a variant of bank loan demand and supply model using a structural vector error correction (SVEC) model to deal with fundamental issue of identification problems. The empirical findings of the bank lending channel from these countries suggest that bank loans decline following the monetary contraction, consistent with the credit channel view. However, it is not clear whether the credit supply is really the binding constraint using the aggregate data, in the event that both credit supply and demand felt simultaneously following monetary policy shock. The results from the aggregate data cannot fully explain the monetary transmission via credit channel. Hence, employing firm-level data approach may shed further insights on the credit channel transmission mechanism.

Keywords: bank lending channels; monetary transmission; vector error correction; modelling; credit channels; emerging markets; Malaysia; Indonesia; Thailand; Philippines; Korea; bank loans; credit supply; credit demand.

DOI: 10.1504/IJMEF.2013.055697

International Journal of Monetary Economics and Finance, 2013 Vol.6 No.1, pp.17 - 39

Received: 20 Sep 2012
Accepted: 27 Jan 2013
Published online: 05 Aug 2013 *

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