International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

The Behavior of Taiwanese Consumer Loan, Deposit Rates and Consumer Loan Premium in Post 1997 Asian Financial Crisis
Chu V. Nguyen, Lucille V. Pointer, David Epstein

Asymmetries in the Taiwanese consumer loan-deposit rate spread (consumer loan premium) were documented. Empirical results revealed that the consumer loan premium adjusts to the threshold faster when the deposit rates fall relative to the lending rates than when the deposit rates move in the opposite direction. This competitive rate setting behavior is consistent within the observed Taiwanese lending institutions, operating in a deregulated and liberated, competitive market over the post Asian financial crisis of 1997. Empirical results also revealed Granger causality from the deposit rate to the consumer loan rate indicating that the consumer loan rate is influenced by the 1-month deposit rate. This finding suggests that the Taiwan countercyclical monetary policy does matter in the short run.

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