Financial development and monetary policy transmission: the case of Thailand

Lerskullawat, Attasuda (2014). Financial development and monetary policy transmission: the case of Thailand. University of Birmingham. Ph.D.

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This thesis aims to examine the channels of monetary policy transmission relating to the banking sector (mainly the bank lending channel, firm balance sheet channel and the interest rate channel), and also to investigate the effect of financial development on these channels in Thailand. We first examine the bank lending channel by introducing the micro-data based study (bank panel data) and using the panel data estimation (fix effect, 2SLS, and GMM estimation). Our result confirms the theoretical aspect of the bank lending channel and we also found that the higher the banks’ size, liquidity, and capitalization will weaken the bank lending channel. The second study will investigate the firm balance sheet channel by examining the effect of firms’ financial condition on firms’ investment and using the GMM estimation. We also found that the less financial constraint firms will have a weaker effect of monetary policy via the firm balance sheet channel than the more financial constraint ones. The third study will examine the interest rate channel by focusing on the interest rate pass-through and using the VECM cointegration technique. We found the pass-through in both long-run and short-run with a relatively high degree in long-run than short-run. For the effect of financial development, we found that banking sector development, capital market development, financial liberalization, financial innovation, and financial competition will cause a weaker effect of the policy interest rate via the bank lending channel and the firm balance sheet channel. However, all of these different aspects of financial development (except the banking sector development) shown a stronger effect on the interest rate pass-through and hence strengthen the interest channel.

Type of Work: Thesis (Doctorates > Ph.D.)
Award Type: Doctorates > Ph.D.
College/Faculty: Colleges (2008 onwards) > College of Social Sciences
School or Department: Birmingham Business School, Department of Economics
Funders: None/not applicable
Subjects: D History General and Old World > DS Asia
H Social Sciences > HC Economic History and Conditions


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