The Effect of US Monetary Policy on the Credit Growth of Emerging Market Economies

Purpose - Monetary policy decisions of advanced economies have effects on the emerging market economies through monetary transmission mechanisms. The purpose of this study is to examine the effect of US monetary policy on the credit growth of emerging market economies. Methodology - For this purpose, the effects of FED policy rates on the private non-financial credit to GDP ratios of selected emerging market economies are analysed by panel data. The study comprises quarterly data over the period of 1990-2018. Austria, Brazil, China, Greece, India, Poland, Portugal, Russia, and Turkey are determined as representatives of emerging market economies. The Seemingly Unrelated Regression (SUR) is used for model estimation Findings - According to the results, while FED reduces policy rates, credit markets of developing countries grow. However, slope and intercept parameters of the regression model are not identical for all countries. In other words, the sensitivity of national credit markets to FED policy rates varies under the influences of economic, legal and political environments of the countries. Discussion - When the results are evaluated comparatively on the country basis, it is seen that the credit markets of European emerging economies show the strongest reaction to the changes in US monetary policy while the credit markets of Turkey and Brazil show the weakest.

___

Adrian, T. and Shin, H.Y. (2009). Prices and Quantities in the Monetary Policy Transmission Mechanism, International Journal of Central Banking, 5 (4), 131-142.

Avery, R. B. (1977). Error Components and Seemingly Unrelated Regressions, Econometrica, 45(1), 199-208.

Baltagi, B.H. (1980). On Seemingly Unrelated Regressions with Error Components, Econometrica, 48(6), 1547- 1551.

Baltagi, B.H. and Raj, B. (1992). A Survey of Recent Theoretical Developments in the Econometrics of Panel Data, Empirical Economics, 17, 85-109.

Bank for International Settlements, Statistics, [online] https://www.bis.org/ (Accessed on June 2019).

Borio, C. and Zhu, H. (2008). Capital regulation, Risk-Taking and Monetary Policy: A Missing Link in the Transmission Mechanism?, BIS Working Papers, No.268.

Bowman, D., Londono, J.M. and Sapriza, H. (2014), U.S. Unconventional Monetary Policy and Transmission to Emerging Market Economies, Board of Governors of the Federal Reserve System, International Finance Discussion Papers, No: 1109.

Bruno, V. and Shin, H.S. (2013). Capital Flows and the Risk-Taking Channel of Monetary Policy, NBER Working Paper Series, No: 18942.

Fendoğlu, S., Kılınç, M . a nd Yörükoğlu, M. (2014). Cross-Border Portfolio Flows and the Role of Macroprudential Policies: Experiences from Turkey, BIS Papers, No: 78.

Gourinchas, P.O. and Obstfeld, M. (2011). Stories of the Twentieth Century for the Twenty-First, NBER Working Paper Series, No: 17252.

Hausman, J.A. and Taylor, W.E. (1981). Panel Data and Unobservable Effects, Econometrica, 49(6), 1377-1398.

Kara, H. (2016). Turkey’s Experience with Macroprudential Policy, BIS Papers, No: 86, 123-139.

Lane, P.R. and McQuade, P. (2013). Domestic Credit Growth and International Capital Flows, European Central Bank Working Paper Series, No: 1566.

Miyajima, K., Mohanty, M.S. and Yetman, J. (2014). Spillovers of US Unconventional Monetary Policy to Asia: The Role of Long-Term Interest Rates, BIS Working Papers, No: 478.

Pesaran, M. H. and Yamagata, T. (2007). Testing Slope Homogeneity in Large Panels, Journal of Econometrics, 142 (1), 50-93.

Rey, H. (2018). Dilemma Not Trilemma: The Global Financial Cycle and Monetary Policy Independence, NBER Working Paper Series, No: 21162.

Sobrun, J. and Turner, P. (2015). Bond Markets and Monetary Policy Dilemmas for the Emerging Markets, BIS Working Papers, No.508.

Takáts, E. and Vela, A. (2014). International Monetary Policy Transmission, BIS Papers, No: 78.

Tatoğlu, F.Y. (2018). İleri Panel Veri Analizi, Istanbul, Beta Basım A.Ş.

The Central Bank of the Republic of Turkey (2014) “Bulletin”, March 2014 (33).

Zellner, A. (1962). An Efficient Method of Estimating Seemingly Unrelated Regressions and Tests for Aggregation Bias, Journal of the American Statistical Association, 57 (298), 348-368.
İşletme Araştırmaları Dergisi-Cover
  • ISSN: 1309-0712
  • Yayın Aralığı: Yılda 4 Sayı
  • Başlangıç: 2009
  • Yayıncı: Melih Topaloğlu