Abstract
In this paper, we estimate a dynamic factor model for Korean macro economy and banking sector's business conditions by using the FAVAR (Factor augmented vector autoregressive) model, and analyze impulse responses of various variables such as macro aggregates and banks' financial ratios.Our empirical analysis shows that the macro economy tends to affect the banking sector unilaterally over time. Next, in our counter-factual analysis where we artificially remove the effect of banking sector on the macro economy in the FAVAR model, we find that there is no substantial effect of banking sector's business conditions on the transmission mechanism of monetary policy.
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call