An Analysis of the Monetary Transmission Mechanism in East Asia

Abstract

This article makes an attempt to uncover and explain the linkages between monetary policy and growth, using the cases of South Korea, the Philippines and Thailand with short-term interest rates as main indicator. It seems that, with the results from the three countries taken together, tighter monetary policy has a larger impact on fixed capital investment than on private consumption, and within the latter, the greatest effect on private durable consumption and equipment investment. However, the author also points to longer-term implications from the 1997 tightening which can be seen in a lack of resurgence in domestic private borrowing and investment in some countries.