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Financial Deregulation and the Monetary Transmission Mechanism
Author(s) -
Fahrer Jerome,
Rohling Thomas
Publication year - 1992
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/j.1467-8462.1992.tb00574.x
Subject(s) - economics , deregulation , interest rate , inflation (cosmology) , monetary policy , monetary economics , real interest rate , business cycle , vector autoregression , macroeconomics , physics , theoretical physics
Major changes to the Australian financial system in the 1980s may possibly have influenced the effects of monetary policy on economic activity. Using vector autoregressive econometric techniques we find that the deregulation of the financial system has made very little difference to the reduced form relationships among interest rates, employment growth, inflation and the growth rate of real credit. We find that interest rates are an important determinant of the business cycle, with credit being much less significant. We also find that monetary policy reacts to unexpected movements in real variables but does not react to surprises in the inflation rate.