An Assessment on the Importance of the Credit Channel in Eastern Block Countries

Monetary policy carried out by monetary authority affects by means of monetary transmission channels consisting of traditional interest channel, asset prices channel, exchange rate channel, credit channel, and expectation channel. Credit channel forming the main subject of this study is divided into two subclass such as channel of bank credit and channel of balance sheet. The objective of this study is to study the effects of bank credits channel in Bulgaria, China, Hungary, and Poland, countries of East Bloc in 1994-2010. In analysis, as indicator of momentary policy, interest rate is taken and the effect of variations in real interest rate on the economy. In the context of effects on economy, the rate of unemployment, inflation and total credit volume are taken into consideration. In testing the stability of the data used in analyses, ADF Unit Root test was utilized. In determining the direction of relationship between variables, in the scope of Granger Causality Test and VAR model, impulse-response functions were used