Effectiveness of credit channel of monetary policy transmission mechanism on commercial banks in Malaysia

Abstract

This investigation efforts to prepare empirical indication on the significance of the monetary policy transmission mechanism particularly credit channel in a small open economy, based on the Malaysian information. This study would just analyse the commercial banking in Malaysia. Also, static panel data method will be using to evaluate the monetary policy. Yearly data will be using from the year 2008 until 2017. The sources of cross-sectional are liquidity, capital and bank size in various between banks. It discovers the fundamental relations between the bank loan and monetary policy variable using two major tests OLS, random effect model and fixes effect model. The results of the study represent there is a credit channel in the case of Malaysia. Therefore, as policymakers, they could apply the monetary policy in command to modification the credit supply to overcome inflation in the economy.