Abstract This paper presents a simple and transparent framework for the monetary transmission mechanism of the South African economy based on the model by Rudebusch and Svensson (1999). This model is extended to consider the long rate and the credit channel in the transmission mechanism. Firstly, we find that the credit channel plays a significant role in the transmission mechanism. Secondly, despite the backward looking nature of the model, impulse responses reveal that the term spread predicts output and inflation in the South African economy.

The credit market is an important subject in today’s macroeconomic world. Prior to the introduction of the credit market, traditional models only included the goods market and money market to form the IS-LM model. Under this IS-LM model, a change in money supply would have a known effect, such as a monetary expansion policy will result in a drop in the bond rate because the IS curve will remain constant. However, many previous studies did not show this effect, but instead the opposite; those that did show this effect, the magnitude of the shift was different than a traditional IS-LM model. Once the credit market is introduced into the IS-LM model, both the goods market (IS curve) and the money market (LM curve) will shift, resulting in an undetermined change in bond rate, and will also introduce the loan rate, which also shows an undetermined change. Under this model, when a monetary expansionary policy is in effect, it is possible that the bond rate could decrease, increase, or remain constant. This thesis will determine how the credit channel operates in Taiwan, using quarterly data from 1992Q1 to 2009Q4. The final result shows that under this new model, the credit channel in Taiwan does not necessarily follow the previously-known theory.

Most theoretical and empirical literatures have investigated the credit channel of monetary transmission in a closed economy. However, when Taiwan becomes financially more internationalized, little literature can provide economic implication for the credit-channel effect of a monetary policy to the case of Taiwan. Therefore we set up a model with the credit market under an open economy to study the credit channel-effect of monetary policy with the inclusion of foreign assets and debts in the bank’s balance sheet. The main conclusion in our theoretical model is that the effect of a tight monetary policy on bank loans will be reduced in an open economy; furthermore, such effect may make bank loans increase after a contractionary monetary policy. Besides, the empirical evidence also shows that bank loans increase after a contractionary monetary policy with the data of Taiwan.

The credit channel literature has made great strides in recent years, however, much of the literature to date has focused largely on the closed economy. Even some of the literatures are in a framework of an open economy, they only concentrate on the fixed or a quasi-fixed exchange rate regime. Therefore, the aim of this paper is to complete the theoretical framework by extending the Bernanke and Blinder model to the case of an open economy under a floating exchange rate regime. We find that the exchange rates puzzle takes place in our model when the influence from credit channels is very significant. We further to compare the credit channel effects under different models. Moreover, we adopt a cointegration analysis to study the credit channel effect, and the empirical evidences show that the credit channels exist in Taiwan for the sample period during November 1991 to January 2005.

[pt] A política monetária brasileira opera, desde 1999, sob o regime de metas para a inflação, em que a taxa de juros é o principal instrumento utilizado para o cumprimento das metas. Esta dissertação estuda o efeito da política monetária sobre o nível de atividade, e fatores que possam fazê-lo flutuar, através da estimação de uma curva IS para o Brasil. Inicialmente, encontramos efeitos significantes da taxa real de juros para o produto em uma curva IS backwardlooking. Em seguida, a partir de um modelo teórico, explicamos variações desse efeito como decorrente de ganhos de eficiência da atividade de intermediação financeira. Utilizando a tendência dos spreads bancários como medida da eficiência da atividade de provisão de crédito na economia, testamos empiricamente esta hipótese, e constatamos que o aumento da potência da política monetária observado ao longo dos últimos anos é consistente com essa explicação. Testes realizados com variáveis fiscais não encontram correlação entre estas e a potência da política monetária. / [en] Monetary policy in Brazil has been working, since 1999, under an inflation targeting regime, in which interest rates are the main instruments in achieving the targets. This dissertation studies the effect of monetary policy on the economy`s output and reasons for its fluctuations, through the estimation of an IS curve for Brazil. We find a significant effect of the real interest rate on output in a backward-looking IS curve. We then explain, using a theoretical model, variations in this effect as arising from efficiency gains in the financial intermediation activity. Using the trend over time of bank spreads as a measure of the efficiency of the lending activity, we test this hypothesis empirically, and find that the higher potency observed in the monetary policy on recent years is consistent with this explanation. Tests using fiscal variables do not find correlation between them and the potency of monetary policy.

This paper uses U.S. macroeconomic data drawn from 2001 to 2010 in order to test for the operation of a credit channel of monetary transmission. Using a combination of a VAR and ADL time series frameworks, evidence is found for the impairment of the credit channel during the crisis period relative to the period which preceded it. Evidence is also found against the presence of a "credit crunch" during the crisis, and supporting evidence is found for the existence of a "credit trap." This analysis indicates a significant role for credit market imperfections in the transmission of monetary policy, and holds policy implications for the potential impact of future monetary expansions conducted in the setting of a financial crisis.

Since the federal funds rate reached the zero lower bound in late 2008, economists have been struggling to adapt their models to a long-term zero rate. Wu and Xia built upon previous research by Fischer Black to create a model for how the federal funds rate behaves during the ZLB period. In their model, the rate actually dips into the negative digits, which the actual federal funds rate does not do. The logic behind the model is that a negative shadow rate is a much better indicator of true economic conditions while the current zero rate merely masks the actual economic reality. It is also easier to use the shadow rate for trend analysis purposes, since the shadow rate is flexible and changes while the federal funds rate remains artificially fixed at zero. Thus, this paper seeks to provide a comparison between the Shadow Rate, as defined by Wu and Xia, and how three key banking variables (leverage, profitability, and non-performing loans to total loans) react in response to the shadow rate, along with three control variables: real GDP growth, inflation, and the current account to GDP ratio. Regression will also be used to determine how three key borrower variables (S&P 500 Index, Credibility Consumer Distress Index, and the ratio of nonfinancial corporate business debt securities to total assets) interact with the shadow rate and the three control variables previously mentioned.

本文研究目的是在動態隨機一般均衡模型當中，加入銀行體系，並以台灣的參數值加以模擬，進一步討論台灣的最適貨幣政策。首先以均衡解進行分析，討論銀行體系如何影響台灣的經濟體，另外，本文探討四種貨幣政策，包含貨幣總數法則，利率法則，其中利率法則包含三種目標：CPI膨脹率目標、國內商品物價膨脹目標及名目匯率目標，模擬結果發現央行使用貨幣總數法則對經濟體的福利大於其他法則，且有助於穩定產出、物價、匯率的波動，另外，提高資本的移動程度以及提高貿易開放程度並不會改變政策福利排序的結果。 / The objective of this paper is to investigate the optimal monetary policy of Taiwan by using a micro-based dynamic stochastic general equilibrium (DSGE) model with the banking sector. The results of steady state show that how the banking sector affects the Taiwanese economy. Furthermore, comparing the performance of alternative monetary policies, the monetary aggregate growth rate rule leads to the highest welfare and lowest volatility of output, inflation rates and exchange rate. It may be the optimal monetary policy of Taiwan. Also, with high degree of capital market friction and highly open market, the rank of these rules is the same.

Nesta tese investigaremos se os bancos, em geral, e se os empréstimos bancários, em particular, desempenham alguma função especial na economia brasileira, especificamente, no que se refere em explicar a performance da atividade produtiva. Procuramos averiguar as evidências teóricas e empíricas que visam desvendar a relevância do canal do crédito, em especial, do canal do empréstimo bancário, enquanto um canal adicional para a transmissão da política monetária. Isso é feito levando em conta o ambiente institucional em que a economia brasileira está inserida, cujo caráter específico, supõem-se de grande relevância para o melhor entendimento das reais condições apresentadas pelo mercado financeiro e, em especial, pelo mercado de crédito. A hipótese central considerada é que, além do impacto promovido pelo tradicional canal da taxa de juros (custo do capital) - através do efeito que exerce sobre as obrigações (depósitos) dos intermediários financeiros e sobre as decisões de investimento dos agentes - a política monetária afeta a atividade econômica através do mercado de crédito, em especial, através do canal do empréstimo bancário, devido ao efeito que exerce sobre a composição dos ativos das instituições financeiras, em particular, sobre as decisões dos bancos em relação ao volume e as condições em que os empréstimos serão ofertados. Considera-se ainda que, o sistema legal do país constitui a base para a formação de sua estrutura financeira e, por conseguinte, contribui para explicar o grau de desenvolvimento do mercado de crédito, bem como, a intensidade com que o canal do crédito responde aos choques de política monetária. Utilizando-se, como instrumento para a análise empírica, da metodologia de vetor auto-regressivo (VAR) constata-se que, os resultados observados estão em sintonia com a teoria do “canal do crédito”, a qual sugere que fricções informacionais no mercado são agravadas em períodos de restrição monetária, resultando em queda na oferta de crédito e aumento no prêmio de financiamento externo (spreads), o que contribui para potencializar a ação da política monetária sobre o produto e sobre os preços. Além disso, corroboram com os argumentos levantados pela literatura de “law and finance”, segundo a qual, aspectos institucionais, relacionados a baixa proteção do direito dos investidores, (associados às deficiências nas regras legais e à ineficiência na execução dessas regras), contribuem para intensificar as fricções informacionais no mercado de crédito e de capitais. / In this research we investigated if the banks, in particular, if the bank loans, carry out some special function in the Brazilian economy, specifically, to explain the performance of the productive activity. We tried to discover the theoretical and empirical evidences that seek to expose the relevance of the credit channel, especially, of the bank loan channel, while an additional channel for the transmission of monetary policy. Taking into account the institutional atmosphere in that the Brazilian economy is inserted, whose specific character is supposed relevant for understanding of the real conditions of the financial market and, especially, of the credit market. The central hypothesis is that, besides the impact caused by the traditional channel of the interest rate (cost of capital) - through the effect that it is done over the obligations (deposits) of the financial intermediaries and over the decisions of the agents' investment - the monetary politics affects the economical activity through the credit market, especially, through the channel of the bank loan, due to the effect that it exercises on the composition of the assets of the financial institutions, in particular, about the decisions of the banks in relation to the volume and the conditions the loans will be offered. The legal system of the country constitutes the basis for the formation of its financial structure and, consequently, it contributes to explain the degree of development of the credit market as well as the intensity with which the channel of credit responds to shocks on monetary policy. As instrument for the empirical investigation, the VAR analysis demonstrated that results are in syntony with the theory of the "credit channel". This theory suggests that informational frictions in the market are worsened in periods of monetary restriction, resulting in fall in the credit supply and increase in the premium of external financing (spreads). This contributes to accelerate the action of the monetary policy on output and prices. In addition, they corroborate the arguments from the literature of "law and finance", which suggests that institutional aspects, related to the low protection of the investors' rights (associated to the deficiencies in the legal rules and to the inefficiency in the execution of those rules), contribute to intensify the informational frictions in the credit and capital market.

Nesta tese investigaremos se os bancos, em geral, e se os empréstimos bancários, em particular, desempenham alguma função especial na economia brasileira, especificamente, no que se refere em explicar a performance da atividade produtiva. Procuramos averiguar as evidências teóricas e empíricas que visam desvendar a relevância do canal do crédito, em especial, do canal do empréstimo bancário, enquanto um canal adicional para a transmissão da política monetária. Isso é feito levando em conta o ambiente institucional em que a economia brasileira está inserida, cujo caráter específico, supõem-se de grande relevância para o melhor entendimento das reais condições apresentadas pelo mercado financeiro e, em especial, pelo mercado de crédito. A hipótese central considerada é que, além do impacto promovido pelo tradicional canal da taxa de juros (custo do capital) - através do efeito que exerce sobre as obrigações (depósitos) dos intermediários financeiros e sobre as decisões de investimento dos agentes - a política monetária afeta a atividade econômica através do mercado de crédito, em especial, através do canal do empréstimo bancário, devido ao efeito que exerce sobre a composição dos ativos das instituições financeiras, em particular, sobre as decisões dos bancos em relação ao volume e as condições em que os empréstimos serão ofertados. Considera-se ainda que, o sistema legal do país constitui a base para a formação de sua estrutura financeira e, por conseguinte, contribui para explicar o grau de desenvolvimento do mercado de crédito, bem como, a intensidade com que o canal do crédito responde aos choques de política monetária. Utilizando-se, como instrumento para a análise empírica, da metodologia de vetor auto-regressivo (VAR) constata-se que, os resultados observados estão em sintonia com a teoria do “canal do crédito”, a qual sugere que fricções informacionais no mercado são agravadas em períodos de restrição monetária, resultando em queda na oferta de crédito e aumento no prêmio de financiamento externo (spreads), o que contribui para potencializar a ação da política monetária sobre o produto e sobre os preços. Além disso, corroboram com os argumentos levantados pela literatura de “law and finance”, segundo a qual, aspectos institucionais, relacionados a baixa proteção do direito dos investidores, (associados às deficiências nas regras legais e à ineficiência na execução dessas regras), contribuem para intensificar as fricções informacionais no mercado de crédito e de capitais. / In this research we investigated if the banks, in particular, if the bank loans, carry out some special function in the Brazilian economy, specifically, to explain the performance of the productive activity. We tried to discover the theoretical and empirical evidences that seek to expose the relevance of the credit channel, especially, of the bank loan channel, while an additional channel for the transmission of monetary policy. Taking into account the institutional atmosphere in that the Brazilian economy is inserted, whose specific character is supposed relevant for understanding of the real conditions of the financial market and, especially, of the credit market. The central hypothesis is that, besides the impact caused by the traditional channel of the interest rate (cost of capital) - through the effect that it is done over the obligations (deposits) of the financial intermediaries and over the decisions of the agents' investment - the monetary politics affects the economical activity through the credit market, especially, through the channel of the bank loan, due to the effect that it exercises on the composition of the assets of the financial institutions, in particular, about the decisions of the banks in relation to the volume and the conditions the loans will be offered. The legal system of the country constitutes the basis for the formation of its financial structure and, consequently, it contributes to explain the degree of development of the credit market as well as the intensity with which the channel of credit responds to shocks on monetary policy. As instrument for the empirical investigation, the VAR analysis demonstrated that results are in syntony with the theory of the "credit channel". This theory suggests that informational frictions in the market are worsened in periods of monetary restriction, resulting in fall in the credit supply and increase in the premium of external financing (spreads). This contributes to accelerate the action of the monetary policy on output and prices. In addition, they corroborate the arguments from the literature of "law and finance", which suggests that institutional aspects, related to the low protection of the investors' rights (associated to the deficiencies in the legal rules and to the inefficiency in the execution of those rules), contribute to intensify the informational frictions in the credit and capital market.