THE TRANSMISSION MECHANISM OF MONETARY POLICY IN MALAYSIA: THROUGH BANK LOANS OR DEPOSITS?

Authors

  • Noor Azlan Ghazali, Aisyah Abdul Rahman School of Business Management, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, 43600 UKM, Bangi, Selangor, Malaysia (e-mail: nag@pkrisc.cc.ukm.my; eychah@pkrisc.cc.ukm.my)

DOI:

https://doi.org/10.31436/ijema.v13i1.107

Abstract

We investigate the link between banking activities and macroeconomic performance in Malaysia with respect to the money and credit channel by studying the causal influence of banks’ assets and liabilities. The Granger causality analyses that we performed support the importance of the credit channel within the Malaysian economy. Significant causations are traced running from changes in loans issued by banks to economic variables. Limited evidence is found for the deposits. Parallel to the working of the credit channel, a one-way causation pattern from deposits to loans is identified. Thus, the Central Bank’s policies with respect to the availability of reservable deposits are transmitted to the economy via bank lending activities, supporting the credit channel explanations.

JEL classification: E5

Key words: Transmission mechanism, Banking, Monetary policy

Downloads

How to Cite

Ghazali, Aisyah Abdul Rahman, N. A. (2013). THE TRANSMISSION MECHANISM OF MONETARY POLICY IN MALAYSIA: THROUGH BANK LOANS OR DEPOSITS?. International Journal of Economics, Management and Accounting, 13(1). https://doi.org/10.31436/ijema.v13i1.107

Issue

Vol. 13 No. 1 (2005)

Section

Articles
Crossref
Scopus
Google Scholar
Europe PMC