This study investigates the expectations hypothesis of term structure of interest rates in Taiwan’s money market by examining six short-term instruments during the period for which monthly data are available (from Jan. 1994 to Dec. 2005). The six instruments studied are 30-, 60-, 90-, 120-, 180-, and 365-day commercial papers, respectively. This study argues that the unsound government bond mar...

When the representative bank’s backward-bending loan supply curve peaks at the profitmaximizing loan rate, credit rationing could exist as an equilibrium phenomenon and the equilibrium interest rate in the loan market is subject to upward rigidity. With the loan-market setting as micro-foundation for investment, this paper further develops a macro model of a small open economy under the regime ...