Abstract
Using Taiwan data, we study the dynamic responses in disaggregated bank loan data such as loan components/secured and unsecured loans to monetary-tightening in the vector autoregression (VAR) framework. For disentangling the pure loan supply-side factors in our empirical results from the demand-side factors caused by drop in economic activities, we compare the responses in disaggregated loans to monetary downturn and the responses to aggregate demand downturn. We observe heterogeneous responses in both loan components and secured/unsecured loans to monetary downturn: enterprise loans rise and personal loans fall; secured loans rise and unsecured loans fall. We also observe a contrast between the responses in the disaggregated loans to monetary downturn and the responses to aggregate demand downturn, which suggests that the responses in the disaggregated loans to monetary downturn is solely not caused by the drop in economic activities; instead, supply-side factor such as flight to quality is responsible for the heterogeneous response in the disaggregated loans during monetary downturn.