Abstract
This paper studies the role that bank loans have played in Taiwan's monetary transmission using data on bank loan components in Taiwan. We estimate VAR models consisting of a set of core macroeconomic variables and various bank loan components, and examine the impulse responses of these loan components to a monetary tightening and a real aggregate demand downturn. We find that business loans and secured loans increase while consumer loans and unsecured loans decline after a monetary tightening. In contrast, we find that the above response patterns of bank loans are generally absent during a real aggregate demand downturn. Our findings suggest that bankers' decisions concerning loan portfolios have contributed to the observed changes in loan components after a monetary tightening, confirming the role of a ＂credit channel＂ in Taiwan's monetary transmission.