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Is the Lending Channel of Monetary Policy Dominant in Australia?
Author(s) -
Suzuki Tomoya
Publication year - 2004
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.2004.00169.x
Subject(s) - loan , monetary policy , economics , schedule , channel (broadcasting) , monetary economics , aggregate demand , transmission channel , credit channel , supply and demand , business , macroeconomics , inflation targeting , transmission (telecommunications) , electrical engineering , management , engineering
The transmission process of monetary policy is a longstanding macroeconomic issue. The lending view is that a monetary tightening affects aggregate demand by shifting the supply schedule of bank loans left. The contraction of bank loans does not necessarily mean a shift of the supply schedule. Therefore, testing the lending view requires the identification of the shifts of the demand and supply schedules in the bank loan market. This paper employs an original approach, finding that the lending channel is not dominant in Australia. The paper also examines features of Australian banks’ behaviour which make the lending channel less dominant.