Does Monetary Policy Regime Determine the Nature of the Money Supply?: Evidence from Seven Countries in the Asia-Pacific Region

23 Pages Posted: 2 Jul 2018

See all articles by Hee-Yul Chai

Hee-Yul Chai

Kyonggi University

Sang B. Hahn

Kyonggi University

Date Written: June 30, 2018

Abstract

This paper tests empirically the causal relationship between bank loans and the monetary base before and after the adoption of inflation targeting in seven Asia-Pacific countries using Toda-Yamamoto Granger non causality test and the bootstrap test for causality. The most striking finding is that the bank loans Granger cause the monetary base during the inflation targeting period in all the countries, except Japan, which was under the influence of the quantitative easing, whereas the causality appeared diverse before the inflation targeting regime. This result implies the need for the policy makers to take the endogenous nature of the money supply into account in the modern economy.

Keywords: Endogenous Money Supply, Money Multiplier, Monetary Policy Regime, Granger Causality, Bootstrap Test

JEL Classification: E44, E51, E52

Suggested Citation

Chai, Hee-Yul and Hahn, Sang B., Does Monetary Policy Regime Determine the Nature of the Money Supply?: Evidence from Seven Countries in the Asia-Pacific Region (June 30, 2018). East Asian Economic Review Vol. 22, No. 2 (June 2018) 217-239, DOI: http://dx.doi.org/10.11644/KIEP.EAER.2018.22.2.343 . Available at SSRN: https://ssrn.com/abstract=3206436 or http://dx.doi.org/10.2139/ssrn.3206436

Hee-Yul Chai

Kyonggi University ( email )

154-42 Gwanggyosan-ro, Iui-dong, Yeongtong-gu
Kyonggi-Do, Suwon 442-760
Korea, Republic of (South Korea)

Sang B. Hahn (Contact Author)

Kyonggi University ( email )

154-42 Gwanggyosan-ro, Iui-dong, Yeongtong-gu
Kyonggi-Do, Suwon 442-760
Korea, Republic of (South Korea)

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