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Credit Market Interest Rates and Exchange Rate Dynamics
Author(s) -
Papazoglou Christos,
Karadeloglou Pavlos
Publication year - 1997
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/(sici)1099-1158(199701)2:1<73::aid-ijfe33>3.0.co;2-6
Subject(s) - economics , interest rate , anticipation (artificial intelligence) , monetary economics , portfolio , exchange rate , loan , monetary policy , financial economics , macroeconomics , artificial intelligence , computer science
This paper examines the effects of both anticipated and unanticipated monetary disturbances in a small open economy by taking into consideration adjustments in the banks' portfolio of earning assets. It primarily focuses on the adjustment of credit market interest rates as well as on that of the exchange rate. In particular, it is shown that the sluggish adjustment of banks' loan portfolio as well as the anticipation of a future policy change can generate perverse short‐run behaviour. © 1997 by John Wiley & Sons, Ltd.