Financial Education on Bank Lending and Economic Volatility in Taiwan

Bienvenido S. Cortes; Shu-Hen Chiang

doi:10.12973/ejmste/76969

Full Text (PDF)

Bienvenido S. Cortes ¹, Shu-Hen Chiang ² ^*

More Detail

¹ Department of Economics, Finance and Banking, Pittsburg State University, USA² Department of Finance, Chung-Yuan Christian University, Chung-li district, Taoyuan city, TAIWAN^* Corresponding Author

Abstract

Education regarding money and banking always tells us that banking is a critical point for macroeconomics. However, there is not enough evidence to further prove the relationship between banking and volatility. In our view, an integration of small and medium-sized enterprises (SMEs) with serious financing constraints, small open economy and bank-based financial system can provide the best opportunity to explore bank-volatility nexus. Fortunately, Taiwan is the most notable case to offer the key to an understanding of banking and volatility for our students of finance. There is sufficient evidence based on panel data analysis with spatial dependency to support the significance of regional bank lending (credit supply) rather than the stock market (credit demand) in explaining volatility. It is clear that the role of bank system in volatility in Taiwan deserves explicit emphasis.

Keywords

volatility
SMEs
credit view
bank lending

License

This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Article Type: Research Article

EURASIA J Math Sci Tech Ed, Volume 13, Issue 10, October 2017, 6395-6406

https://doi.org/10.12973/ejmste/76969

Publication date: 20 Sep 2017

Article Views: 2174

Article Downloads: 1143

Open Access References How to cite this article

References

Abe, M., & Kawakami, M. (1997). A distributive comparison of enterprise size in Korea and Taiwan. Developing Economies, 35(4), 382-400.
Ahmed, S., Levin, A., & Wilson, B.A. (2004). Recent improvements in U.S. macroeconomic stability: good policy, good practice or good luck? Review of Economics and Statistics, 86(3), 824-832.
Ang, J. B., & McKibbin, W. J. (2007). Financial liberalization, financial sector development and growth: evidence from Malaysia. Journal of Development Economics, 84(1), 215-233.
Avery, R. B., Bostic, R. W., & Samolyk, K. A. (1998). The role of personal wealth in small business finance. Journal of Banking and Finance, 22(6), 1019-1061.
Baldwin, J. R., & Brown, M. W. (2004). Regional manufacturing employment volatility in Canada: the effects of specialization and trade. Papers in Regional Science, 83(3), 519- 541.
Bangake, C., & Eggoh, J. C. (2011). Further evidence on finance-growth causality: a panel data analysis. Economic System, 35(2), 176-188.
Beck, T., & Levine, R. (2004). Stock markets, banks and growth: panel evidence. Journal of Banking and Finance, 28(3), 423-442.
Bencivenga, V. R., Smith, B. D., & Starr, R. M. (1991). Financial intermediation and endogenous growth. Review of Economic Studies, 58(2), 195-209.
Berger, A. N., & Udell, G. F. (1995). Relationship lending and lines of credit in small firm finance. Journal of Business, 68(3), 351-381.
Berger, A. N., & Udell, G. F. (1998). The economics of small business finance: the role of private equity and debt markets in the financial growth cycle. Journal of Banking and Finance, 22(6), 613-673.
Berger, A. N., & Udell, G. F. (2006). A more complete conceptual framework for SME finance. Journal of Banking and Finance, 30(11), 2945-2966.
Bernanke, B. S., & Blinder, A. S. (1988). Credit, money and aggregate demand. American Economic Review, 78(2), 435-439.
Bernanke, B. S., & Kuttner, K. N. (2005). What explains the stock market’s reaction to federal reserve policy? Journal of Finance, 60(3), 1221-1257.
Bernanke, B. S., & Lown, C. S. (1991). The credit crunch. Brookings Papers on Economic Activity, 2, 205-247.
Bernanke, B. S., Gertler, M., & Gilchrist, S. (1996). The financial accelerator and the flight to quality. Review of Economics and Statistics, 78(1), 1-15.
Bhattacharya, R. (2003). Sources of variation in regional economies. Annals of Regional Science, 37(2), 291-302.
Blanchard, O. J., & Simon, J. (2001). The long and large decline in U.S. output volatility. Brookings Papers on Economic Activity, 1, 1-74.
Blinder, A. S., & Stiglitz, J. E. (1983). Money, credit constraints and economic activity. American Economic Review, 73(2), 297-302.
Carbó, S., López P. R., & Loayza, N. (2007). Financial innovation in banking: impact on regional growth. Regional Studies, 41(3), 311-323.
Carlino, G. A., & DeFina, R. (1998). The differential regional effects of monetary policy. Review of Economics and Statistics, 80(4), 572-87.
Carlino, G. A., & DeFina, R. (1999). The differential regional effects of monetary policy: evidence from the U.S. states. Journal of Regional Science, 39(2), 229-358.
Carlino, G. A., DeFina, R., & Sill, K. (2013). The long and large decline in state employment growth volatility. Journal of Money, Banking and Credit, 45(2-3), 521-534.
Carlstrom, C. T., & Samolyk, K. A. (1995). Loan sales as a response to market-based capital constraints. Journal of Banking and Finance, 19(3), 627-646.
Chiang, S. (2009). The effects of industrial diversification on regional unemployment in Taiwan: is the portfolio theory applicable? Annals of Regional Science, 43(4), 947-962.
Clarida, R., Gali, J., & Gertler, M. (2000). Monetary policy rules and macroeconomic stability: evidence and some theory. Quarterly Journal of Economics, 115(1), 147-180.
Clark, K., & Summer, L. (1981). Demographic differences in cyclical employment variation. Journal of Human Resources, 16(1), 61-79.
Conroy, M. E. (1974). Alternative strategies for regional industrial diversification. Southern Economic Journal, 41(3), 492-505.
de Mello, J. (1999). Foreign direct investment led growth: evidence from time-series and panel data. Oxford Economic Papers, 51(1), 133-151.
Elyasiani, E., Mansur, I., & Pagano, M. S. (2007). Convergence and risk-return linkages across financial service firms. Journal of Banking and Finance, 31(4), 1167-1190.
Fama, E. F. (1985). What’s different about banks? Journal of Monetary Economics, 15(1), 29-39.
Fernández de Guevara, J., & Maudos, J. (2009). Regional financial development and bank competition: effects on firms’ growth. Regional Studies, 43(2), 211-228.
Fishman, A. (2009). Financial intermediaries as facilitators of information exchange between lenders and reputation formation by borrowers. International Review of Economics and Finance, 18(2), 301-305.
Grunert, J., & Norden, L. (2012). Bargaining power and information in SME lending. Small Business Economics, 39(2), 401-419.
Hamilton, J. D. (1983). Oil and the macroeconomy since World War II. Journal of Political Economy, 91(2), 228-248.
Hooker, M. A. (1996). What happened to the oil price-macroeconomy relationship? Journal of Monetary Economics, 38(2), 195-213.
Hu, M., & Schive, C. (1998). The changing competitiveness of Taiwan’s manufacturing SMEs. Small Business Economics, 11(4), 315–326.
Ireland, P. N. (2004). Money’s role in the monetary business cycle. Journal of Money, Credit and Banking, 36(6), 969-984.
Jaimovich, N., & Siu, H. E. (2009). The young, the old and the restless: demographics and business cycle volatility. American Economic Review, 99(3), 804-826.
Jayaratne, J., & Strahan, P. E. (1996). The finance-growth nexus: evidence from bank branch deregulation. Quarterly Journal of Economics, 111(3), 639-670.
Jeong, W., Kymn, K. O., Kymn, C. J., & Cushing, B. (2006). Testing the credit view with pooled data: dynamic links among state bank health, investment-oriented bank loans and economic performance. Annals of Regional Science, 40(1), 133-145.
Kato, T., & Wan, H. (2001). Specialization pattern and multistaged growth: Korea and Taiwan compared. Review of Development Economics, 5(2), 256-265.
King, R. G., & Levine, R. (1993). Finance and growth: Schumpeter might be right. Quarterly Journal of Economics, 108(3), 717-737.
Lensink, R., & Morrissey, O. (2006). Foreign direct investment: flows, volatility and the impact on growth. Review of International Economics, 14(3), 478-493.
Levine, R., Loayza, N., & Beck, T. (2000). Financial intermediation and growth: causality and causes. Journal of Monetary Economics, 46(1), 31-77.
Malizia, E. E., & Ke, S. (1993). The influence of economic diversity on unemployment and stability. Journal of Regional Science, 33(2), 221-235.
Meyer, L. H. (1998). The present and future roles of banks in small business finance. Journal of Banking and Finance, 22(6), 1109-1116.
Mishkin, F. S. (2007). The economics of money, banking and financial markets. Boston: Person Education.
Morgan, D. P., Rime, B., & Strahan, P. (2004). Bank integration and state business cycles. Quarterly Journal of Economics, 119(4), 1555-1584.
Oliner, S. D., & Rudebusch, G. D. (1996). Monetary policy and credit conditions: evidence from the composition of external finance: comment. American Economic Review, 86(1), 300-309.
Owyang, M. T., Piger, J., & Wall, H. J. (2008). A state-level analysis of the Great Moderation. Regional Science and Urban Economics, 38(6), 578-589.
Petersen, M., & Rajan, R. (1995). The effect of credit market competition on lending relationships. Quarterly Journal of Economics, 110(2), 407-443.
Poilly, C. (2010). Does money matter for the identification of monetary policy shocks: a DSGE perspective? Journal of Economic Dynamics & Control, 34(10), 2159-2178.
Ramirez, C. D. (2004). Monetary policy and the credit channel in an open economy. International Review of Economics and Finance, 13(4), 363-369.
Rios-Rull, J. V. (1996). Life-cycle economies and aggregate fluctuations. Review of Economic Studies, 63(3), 465-489.
Rodgers, Y. M., & Nataraj, S. (1999). Labor market flexibility in East Asia: lessons from Taiwan. Economic Development and Cultural Change, 48(1), 51-69.
Romer, D. H. (2000). Keynesian macroeconomics without the LM curve. Journal of Economic Perspectives, 14(2), 149-171.
Samolyk, K. A. (1994). Banking conditions and regional economic performance: evidence of a regional credit channel. Journal of Monetary Economics, 34(3), 259-278.
Stock, J. H., & Watson, M. W. (2002). Has the business cycle changed and why? NBER Macroeconomics Annual, 17, 159-230.
Summers, P. M. (2005). What caused the Great Moderation? Some cross-country evidence. Economic Review, Federal Reserve Bank of Kansas City, 3, 5-32.
Trendle, B. (2006). Regional economic instability: role of industrial diversification and spatial spillovers. Annals of Regional Science, 40(4), 767-778.
Wu, R., & Huang, C. (2002). Entrepreneurship in Taiwan: turning point to restart. Asia entrepreneurship and SME summit: sustaining competitiveness in the global economy, co-sponsored by Mansfield Center for Pacific Affairs (MCPA) and Hong Kong Productivity Council (HKPC), Hong Kong.
Wu, Y. (1999). More on monetary policy in a small open economy: a credit view. International Review of Economics and Finance, 8(2), 223-235.
Zhang, X. (2009). From banks to markets: Malaysian and Taiwanese finance in transition. Review of International Political Economy, 16(3), 382-408.

How to cite this article

APA

Cortes, B. S., & Chiang, S.-H. (2017). Financial Education on Bank Lending and Economic Volatility in Taiwan. Eurasia Journal of Mathematics, Science and Technology Education, 13(10), 6395-6406. https://doi.org/10.12973/ejmste/76969

Vancouver

Cortes BS, Chiang SH. Financial Education on Bank Lending and Economic Volatility in Taiwan. EURASIA J Math Sci Tech Ed. 2017;13(10):6395-406. https://doi.org/10.12973/ejmste/76969

AMA

Cortes BS, Chiang SH. Financial Education on Bank Lending and Economic Volatility in Taiwan. EURASIA J Math Sci Tech Ed. 2017;13(10), 6395-6406. https://doi.org/10.12973/ejmste/76969

Chicago

Cortes, Bienvenido S., and Shu-Hen Chiang. "Financial Education on Bank Lending and Economic Volatility in Taiwan". Eurasia Journal of Mathematics, Science and Technology Education 2017 13 no. 10 (2017): 6395-6406. https://doi.org/10.12973/ejmste/76969

Harvard

Cortes, B. S., and Chiang, S.-H. (2017). Financial Education on Bank Lending and Economic Volatility in Taiwan. Eurasia Journal of Mathematics, Science and Technology Education, 13(10), pp. 6395-6406. https://doi.org/10.12973/ejmste/76969

MLA

Cortes, Bienvenido S. et al. "Financial Education on Bank Lending and Economic Volatility in Taiwan". Eurasia Journal of Mathematics, Science and Technology Education, vol. 13, no. 10, 2017, pp. 6395-6406. https://doi.org/10.12973/ejmste/76969