Developing countries have typically pursued procyclical macroeconomic policies, which tend to amplify the underlying business cycle (the "when-it-rains-it-pours" phenomenon). There is, however, evidence to suggest that about a third of developing countries have shifted from procyclical to countercyclical fiscal policy over the last decade. We show that the same is true of monetary policy: around 35 percent of developing countries have become countercyclical over the last decade. We provide evidence that links procyclical monetary policy in developing countries to what we refer as the "fear of free falling;" that is, the need to raise interest rates in bad times to defend the domestic currency.
{"title":"Overcoming the Fear of Free Falling: Monetary Policy Graduation in Emerging Markets","authors":"Carlos A. Végh, G. Vúletin","doi":"10.3386/w18175","DOIUrl":"https://doi.org/10.3386/w18175","url":null,"abstract":"Developing countries have typically pursued procyclical macroeconomic policies, which tend to amplify the underlying business cycle (the \"when-it-rains-it-pours\" phenomenon). There is, however, evidence to suggest that about a third of developing countries have shifted from procyclical to countercyclical fiscal policy over the last decade. We show that the same is true of monetary policy: around 35 percent of developing countries have become countercyclical over the last decade. We provide evidence that links procyclical monetary policy in developing countries to what we refer as the \"fear of free falling;\" that is, the need to raise interest rates in bad times to defend the domestic currency.","PeriodicalId":178626,"journal":{"name":"ERN: Monetary & Fiscal Policies in Emerging Markets (Topic)","volume":"59 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123974993","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Tomasz Lyziak, O. Demchuk, J. Przystupa, Anna Sznajderska, Ewa Wróbel
In the light of the results of empirical studies presented in the Report and the literature available45 it may be concluded that the form of the monetary policy transmission mechanism in Poland is consistent with structural features of the Polish economy and coincides with those characteristic of more developed European economies, e.g. the euro area. Although the financial intermediation system is less developed than in the euro area, Poland, like the new EU Member States is characterised by a lower degree of rigidity and more frequent price adjustments (as a result of a relatively higher and more volatile inflation), due to which there exist no grounds for stating that the transmission mechanism is weaker in these countries than in the euro area countries. The characteristics of the monetary policy transmission mechanism in Poland, which changed considerably in the transition period along with the development of the financial system and changes in the monetary policy, displayed symptoms of stabilisation in 2004/2005-2007. Poland’s accession to the European Union, resulting in a major reduction of macroeconomic uncertainty, was one of the factors that contributed to this process. The monetary policy transmission mechanism was, however, disturbed by the financial crisis. Its impact on the transmission mechanism remains strong, which is demonstrated notably by the analysis of the effectiveness of transmission mechanism channels.
{"title":"Monetary Policy Transmission Mechanism in Poland - What Do We Know in 2011?","authors":"Tomasz Lyziak, O. Demchuk, J. Przystupa, Anna Sznajderska, Ewa Wróbel","doi":"10.2139/SSRN.2102558","DOIUrl":"https://doi.org/10.2139/SSRN.2102558","url":null,"abstract":"In the light of the results of empirical studies presented in the Report and the literature available45 it may be concluded that the form of the monetary policy transmission mechanism in Poland is consistent with structural features of the Polish economy and coincides with those characteristic of more developed European economies, e.g. the euro area. Although the financial intermediation system is less developed than in the euro area, Poland, like the new EU Member States is characterised by a lower degree of rigidity and more frequent price adjustments (as a result of a relatively higher and more volatile inflation), due to which there exist no grounds for stating that the transmission mechanism is weaker in these countries than in the euro area countries. The characteristics of the monetary policy transmission mechanism in Poland, which changed considerably in the transition period along with the development of the financial system and changes in the monetary policy, displayed symptoms of stabilisation in 2004/2005-2007. Poland’s accession to the European Union, resulting in a major reduction of macroeconomic uncertainty, was one of the factors that contributed to this process. The monetary policy transmission mechanism was, however, disturbed by the financial crisis. Its impact on the transmission mechanism remains strong, which is demonstrated notably by the analysis of the effectiveness of transmission mechanism channels.","PeriodicalId":178626,"journal":{"name":"ERN: Monetary & Fiscal Policies in Emerging Markets (Topic)","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123430589","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The study, I investigate the cyclicality properties and relative effectiveness of monetary and fiscal policy for 13 oil exporting country during 1993-2011 by pool model. The paper presents evidence that supports the link between an Index of Institutitunal Quality (law and order, government stability, investment profile, etc.), the cyclicality of macroeconomic policy, and the volatilities of output and the iii) relative effectiveness of fiscal policies in oil-exporting countries. The main finding is that macroeconomic policy is significantly pro-cyclical in countries where institutions exhibit low quality. Empirical result show that during 1993-2011 period resource-rich countries that exhibited institutional quality index averages above the threshold range in Iran, Kazakhstan, Kuwait, Norway, Saud Arabia, UEA and Russia. Finally, we find that the effect of fiscal policy on economic cycle first than monetary policy, because of monetary policy obeys the fiscal goals so money supplies to be high in booming and has positively correlation with the cycle. But monetary policy has greater influence than fiscal policy. The paper shows that focused countercyclical macroeconomic policies are feasible in oil-dependent countries.
{"title":"Cyclical Properties of Macroeconomic Policy in Oil-Reach Country (Draft)","authors":"Shaig Adigozalov","doi":"10.2139/ssrn.2045666","DOIUrl":"https://doi.org/10.2139/ssrn.2045666","url":null,"abstract":"The study, I investigate the cyclicality properties and relative effectiveness of monetary and fiscal policy for 13 oil exporting country during 1993-2011 by pool model. The paper presents evidence that supports the link between an Index of Institutitunal Quality (law and order, government stability, investment profile, etc.), the cyclicality of macroeconomic policy, and the volatilities of output and the iii) relative effectiveness of fiscal policies in oil-exporting countries. The main finding is that macroeconomic policy is significantly pro-cyclical in countries where institutions exhibit low quality. Empirical result show that during 1993-2011 period resource-rich countries that exhibited institutional quality index averages above the threshold range in Iran, Kazakhstan, Kuwait, Norway, Saud Arabia, UEA and Russia. Finally, we find that the effect of fiscal policy on economic cycle first than monetary policy, because of monetary policy obeys the fiscal goals so money supplies to be high in booming and has positively correlation with the cycle. But monetary policy has greater influence than fiscal policy. The paper shows that focused countercyclical macroeconomic policies are feasible in oil-dependent countries.","PeriodicalId":178626,"journal":{"name":"ERN: Monetary & Fiscal Policies in Emerging Markets (Topic)","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-04-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122510237","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
While it is difficult to foresee the triggers for crisis, continuous monitoring and assessment of the buildup of risks need to be an integral part of any policy framework for maintaining overall economic and financial stability. This paper is an attempt in that direction. This paper initially attempts to identify the macro risk indicators, which has potential of causing instability to the economic system and which is then transmitted to the financial system. These risk indicators are then combined into single composite index as an indicator of overall macroeconomic stability. The various risk indicators have been appropriately validated through their impact on GDP and NPAs in the banking system. The paper also initially attempts to identify various financial market indicators which reveal the broad dynamics of the financial system. Similar to the macro risk indicators, these financial market indicators are combined into one composite index and then its relationship with macro risk indicators and their composite index is examined in the VAR framework.A VAR analysis reveals that both the composite indices of macro risks and market risks as developed in this paper have adverse impact on the growth in GDP. Among the various macro risk factors, global and external sector indicators appear to have more severe impact on the growth. The adverse impact of macro risk on growth of GDP was found to be immediate but the impact of market risks indicators increase in size and dominate over time. It is observed that the macro risk indicators have substantial adverse impact on the financial market indicator and its optimal lag works out to be about six months. Results of this exercise though exploratory in nature but are meaningful from policy perspective. One of the advantages of this analysis is its flexibility. It can easily be incorporated in a more comprehensive framework for assessment of systemic risks and for stress tests. The findings of this paper can be further developed while retaining the underlying basic structure.
{"title":"Macroeconomic Risks and Financial Stability: An Econometric Analysis for India*","authors":"Dr. Rabi N. Mishra, A. Prakash, Balwant Singh","doi":"10.2139/ssrn.2163428","DOIUrl":"https://doi.org/10.2139/ssrn.2163428","url":null,"abstract":"While it is difficult to foresee the triggers for crisis, continuous monitoring and assessment of the buildup of risks need to be an integral part of any policy framework for maintaining overall economic and financial stability. This paper is an attempt in that direction. This paper initially attempts to identify the macro risk indicators, which has potential of causing instability to the economic system and which is then transmitted to the financial system. These risk indicators are then combined into single composite index as an indicator of overall macroeconomic stability. The various risk indicators have been appropriately validated through their impact on GDP and NPAs in the banking system. The paper also initially attempts to identify various financial market indicators which reveal the broad dynamics of the financial system. Similar to the macro risk indicators, these financial market indicators are combined into one composite index and then its relationship with macro risk indicators and their composite index is examined in the VAR framework.A VAR analysis reveals that both the composite indices of macro risks and market risks as developed in this paper have adverse impact on the growth in GDP. Among the various macro risk factors, global and external sector indicators appear to have more severe impact on the growth. The adverse impact of macro risk on growth of GDP was found to be immediate but the impact of market risks indicators increase in size and dominate over time. It is observed that the macro risk indicators have substantial adverse impact on the financial market indicator and its optimal lag works out to be about six months. Results of this exercise though exploratory in nature but are meaningful from policy perspective. One of the advantages of this analysis is its flexibility. It can easily be incorporated in a more comprehensive framework for assessment of systemic risks and for stress tests. The findings of this paper can be further developed while retaining the underlying basic structure.","PeriodicalId":178626,"journal":{"name":"ERN: Monetary & Fiscal Policies in Emerging Markets (Topic)","volume":"4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-04-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123754767","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
For the individual European Monetary Union (EMU) members fiscal policy has gained in importance owing to the loss of monetary policy as an autonomous policy instrument. Based on a small open economy dynamic stochastic general equilibrium (DSGE) model with fiscal feedback rules, we analyze the dynamic macroeconomic response in particular of the current account under alternative exchange rate regimes. Our results indicate that entry into monetary union makes the economy more vulnerable to a productivity shock and leads to higher variability of the current account. For a risk premium shock, an entry into EMU implies lower variability of most macroeconomic variables, but a higher persistence in the adjustment process of the current account. For both shocks, a countercyclical fiscal response to the current account is more stabilizing for most macroeconomic variables than a conventional countercyclical response to output. Stabilizing the current account comes at the price of higher variability of output in the short‐run, however.
{"title":"Fiscal Policy, Monetary Regimes and Current Account Dynamics","authors":"B. Herz, Stefan Hohberger","doi":"10.1111/roie.12024","DOIUrl":"https://doi.org/10.1111/roie.12024","url":null,"abstract":"For the individual European Monetary Union (EMU) members fiscal policy has gained in importance owing to the loss of monetary policy as an autonomous policy instrument. Based on a small open economy dynamic stochastic general equilibrium (DSGE) model with fiscal feedback rules, we analyze the dynamic macroeconomic response in particular of the current account under alternative exchange rate regimes. Our results indicate that entry into monetary union makes the economy more vulnerable to a productivity shock and leads to higher variability of the current account. For a risk premium shock, an entry into EMU implies lower variability of most macroeconomic variables, but a higher persistence in the adjustment process of the current account. For both shocks, a countercyclical fiscal response to the current account is more stabilizing for most macroeconomic variables than a conventional countercyclical response to output. Stabilizing the current account comes at the price of higher variability of output in the short‐run, however.","PeriodicalId":178626,"journal":{"name":"ERN: Monetary & Fiscal Policies in Emerging Markets (Topic)","volume":"56 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-03-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127490975","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Due to buoyant capital inflows East Asian central banks with exchange rate targets accumulate foreign reserves and thereby increase surplus liquidity. East Asian central banks with more flexible exchange rate regimes also face surplus liquidity that mainly emanates from past accumulation of foreign reserves. We show based on an augmented Barro-Gordon-type central bank loss function that in both cases surplus liquidity limits monetary policy autonomy. In case of fixed exchange rates East Asian central banks can escape from the impossible trinity and gain monetary policy autonomy by using non-market–based sterilization which leads to financial sector distortions. In a flexible exchange rate regime monetary policy autonomy can be gained without financial sector distortions by using market-based sterilization. As central banks face substantial sterilization costs as well as revaluation losses on foreign reserves, however, monetary policy autonomy is eroded.
{"title":"Limits of Monetary Policy Autonomy by East Asian Debtor Central Banks","authors":"Axel Loeffler, G. Schnabl, Franziska Schobert","doi":"10.2139/ssrn.2012274","DOIUrl":"https://doi.org/10.2139/ssrn.2012274","url":null,"abstract":"Due to buoyant capital inflows East Asian central banks with exchange rate targets accumulate foreign reserves and thereby increase surplus liquidity. East Asian central banks with more flexible exchange rate regimes also face surplus liquidity that mainly emanates from past accumulation of foreign reserves. We show based on an augmented Barro-Gordon-type central bank loss function that in both cases surplus liquidity limits monetary policy autonomy. In case of fixed exchange rates East Asian central banks can escape from the impossible trinity and gain monetary policy autonomy by using non-market–based sterilization which leads to financial sector distortions. In a flexible exchange rate regime monetary policy autonomy can be gained without financial sector distortions by using market-based sterilization. As central banks face substantial sterilization costs as well as revaluation losses on foreign reserves, however, monetary policy autonomy is eroded.","PeriodicalId":178626,"journal":{"name":"ERN: Monetary & Fiscal Policies in Emerging Markets (Topic)","volume":"156 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-02-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132838432","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract: The developments that took place since the beginning of the global crisis indicate that the comparison of unit labor costs of different economies would have a continuously growing impact. Unit labor costs and/or relative differences in unit labor productivity as a determinant of international competition – particularly in case of manufacturing – also constitute the basis of real and effective exchange rate calculations by various agencies. In this respect, it is possible to ponder over the question of “trade and currency wars” among both within the bloc of developed countries of the center, and among the developed countries and developing and emerging nations. The reason lies in the fact that these countries have faced substantial short-term capital inflows (Quantitative Easing1-2). Outside OECD, Brazil and China are also examples of countries facing the impact of short-term monetary infusions. This trend explains why developing countries are now imposing measures associated with tight monetary policies. The objective of the present study is to analyze the grounds and potential outcome of quantitative tightening in developing countries.
{"title":"The Dilemma of 'Currency Wars' and 'Trade Wars' as a Strategy to Leave the Crisis Behind: The Impact of Different Unit Labor Costs on Developing Nations","authors":"M. Şi̇şman","doi":"10.2139/ssrn.1970564","DOIUrl":"https://doi.org/10.2139/ssrn.1970564","url":null,"abstract":"Abstract: The developments that took place since the beginning of the global crisis indicate that the comparison of unit labor costs of different economies would have a continuously growing impact. Unit labor costs and/or relative differences in unit labor productivity as a determinant of international competition – particularly in case of manufacturing – also constitute the basis of real and effective exchange rate calculations by various agencies. In this respect, it is possible to ponder over the question of “trade and currency wars” among both within the bloc of developed countries of the center, and among the developed countries and developing and emerging nations. The reason lies in the fact that these countries have faced substantial short-term capital inflows (Quantitative Easing1-2). Outside OECD, Brazil and China are also examples of countries facing the impact of short-term monetary infusions. This trend explains why developing countries are now imposing measures associated with tight monetary policies. The objective of the present study is to analyze the grounds and potential outcome of quantitative tightening in developing countries.","PeriodicalId":178626,"journal":{"name":"ERN: Monetary & Fiscal Policies in Emerging Markets (Topic)","volume":"os-10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-12-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127972141","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In the mainstream monetary policy consensus that prevailed prior to the global crisis, there was increasing de-emphasis on money and credit aggregates in the conduct of monetary policy, because of the overwhelming faith on the interest rate, both as an instrument of policy and as an indicator of overall monetary and liquidity conditions. In the aftermath of the global crisis, however, there seems to be a renewed emphasis on money and credit trends, though how the money growth indicator could be used in the actual conduct of monetary policy remains largely unclear. The Reserve Bank, despite abandoning explicit monetary targeting in 1998, still continues to announce indicative money and credit growth trajectories and also monitors their trends in order to identify any lead information that may be relevant for policy. In the analysis of the information content embodied in money growth, recognizing the possible sources of instability in money demand and resultant changes in money velocity becomes critical. In the context of the severe "velocity crowding out of quantitative easing" that was experienced in the US in the midst of the global crisis, it is important to recognise that external developments, particularly the risk of contagion from a crisis, could at times add significant instability to domestic money demand. Shocks to money demand from both anticipated and unanticipated factors could make the velocity unstable, adding thereby noise to the analysis of the money growth variable. This paper studies the money velocity trends for India, and using the standard determinants of velocity from the literature, it aims at exploring the possibility of generating forward looking assessment of velocity, so that money growth trends could be better explained relative to other economic variables, particularly output and prices. Every projected money growth trajectory, ideally, is linked to conditional predictability of velocity, which though is not always feasible.But in the absence of a reference to velocity trends, money growth alone at times may be misleading, even in the short-run. As per the empirical findings of this paper, conventional determinants of velocity appear to be statistically significant for Indian data, but the estimated parameters alone may not be sufficient for undertaking a forward looking assessment of velocity, particularly during periods of major uncertainty that could cause velocity to deviate significantly from its medium-term trend.
{"title":"The Velocity Crowding-Out Impact: Why High Money Growth is Not Always Inflationary","authors":"Sitikantha Pattanaik, Subhadhra S.","doi":"10.2139/ssrn.1874707","DOIUrl":"https://doi.org/10.2139/ssrn.1874707","url":null,"abstract":"In the mainstream monetary policy consensus that prevailed prior to the global crisis, there was increasing de-emphasis on money and credit aggregates in the conduct of monetary policy, because of the overwhelming faith on the interest rate, both as an instrument of policy and as an indicator of overall monetary and liquidity conditions. In the aftermath of the global crisis, however, there seems to be a renewed emphasis on money and credit trends, though how the money growth indicator could be used in the actual conduct of monetary policy remains largely unclear. The Reserve Bank, despite abandoning explicit monetary targeting in 1998, still continues to announce indicative money and credit growth trajectories and also monitors their trends in order to identify any lead information that may be relevant for policy. In the analysis of the information content embodied in money growth, recognizing the possible sources of instability in money demand and resultant changes in money velocity becomes critical. In the context of the severe \"velocity crowding out of quantitative easing\" that was experienced in the US in the midst of the global crisis, it is important to recognise that external developments, particularly the risk of contagion from a crisis, could at times add significant instability to domestic money demand. Shocks to money demand from both anticipated and unanticipated factors could make the velocity unstable, adding thereby noise to the analysis of the money growth variable. This paper studies the money velocity trends for India, and using the standard determinants of velocity from the literature, it aims at exploring the possibility of generating forward looking assessment of velocity, so that money growth trends could be better explained relative to other economic variables, particularly output and prices. Every projected money growth trajectory, ideally, is linked to conditional predictability of velocity, which though is not always feasible.But in the absence of a reference to velocity trends, money growth alone at times may be misleading, even in the short-run. As per the empirical findings of this paper, conventional determinants of velocity appear to be statistically significant for Indian data, but the estimated parameters alone may not be sufficient for undertaking a forward looking assessment of velocity, particularly during periods of major uncertainty that could cause velocity to deviate significantly from its medium-term trend.","PeriodicalId":178626,"journal":{"name":"ERN: Monetary & Fiscal Policies in Emerging Markets (Topic)","volume":"8 10","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-06-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"120968221","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper, explored the empirical importance of credit. It adds to the existing literature in two ways. First, it analyses in a systematic way both endogenous and exogenous instruments of monetary mechanism using information on the country’s main economic objectives as a proxy for bank credit availability by providing a framework in which to analyse the evidence in controlling money and credit. Second, by using bank’s prices (rather than quantities) it provides an alternative way to disentangle loan supply from loan demand shift in the ‘credit channel’ literature. The paper also provides empirical evidence on the role of banks in the monetary transmission process. The principal channel appears through lending to firms, which influences entire economy investment. The existence of an effective banking industry is necessary for every economy because it create the necessary environment for economic growth and development through its role in intermediating funds from surplus to deficit economic units. This stimulates investment economic growth, and employment as well as international trade and payment. The bottom line is that credit is an important part of the transmission process of Nigerian Monetary Policy.
{"title":"Transmission Mechanism of Monetary Policy in Nigeria","authors":"C. S. Okaro","doi":"10.2139/ssrn.2922188","DOIUrl":"https://doi.org/10.2139/ssrn.2922188","url":null,"abstract":"This paper, explored the empirical importance of credit. It adds to the existing literature in two ways. First, it analyses in a systematic way both endogenous and exogenous instruments of monetary mechanism using information on the country’s main economic objectives as a proxy for bank credit availability by providing a framework in which to analyse the evidence in controlling money and credit. Second, by using bank’s prices (rather than quantities) it provides an alternative way to disentangle loan supply from loan demand shift in the ‘credit channel’ literature. The paper also provides empirical evidence on the role of banks in the monetary transmission process. The principal channel appears through lending to firms, which influences entire economy investment. The existence of an effective banking industry is necessary for every economy because it create the necessary environment for economic growth and development through its role in intermediating funds from surplus to deficit economic units. This stimulates investment economic growth, and employment as well as international trade and payment. The bottom line is that credit is an important part of the transmission process of Nigerian Monetary Policy.","PeriodicalId":178626,"journal":{"name":"ERN: Monetary & Fiscal Policies in Emerging Markets (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128853783","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2011-04-01DOI: 10.5089/9781455226078.001.A001
S. Peiris, Ding Ding, R. Anand
This paper develops a practical model-based forecasting and policy analysis system (FPAS) to support a transition to an inflation forecast targeting regime in Sri Lanka. The FPAS model provides a relatively good forecast for inflation and a framework to evaluate policy trade-offs. The model simulations suggest that an open-economy inflation targeting rule can reduce macroeconomic volatility and anchor inflationary expectations given the size and type of shocks faced by the economy. Sri Lanka could aim to target a broad inflation range initially due to its susceptibility supply-side shocks while enhancing exchange rate flexibility and strengthening the effectiveness of monetary policy in the transition to an inflation forecast targeting regime.
{"title":"Toward Inflation Targeting in Sri Lanka","authors":"S. Peiris, Ding Ding, R. Anand","doi":"10.5089/9781455226078.001.A001","DOIUrl":"https://doi.org/10.5089/9781455226078.001.A001","url":null,"abstract":"This paper develops a practical model-based forecasting and policy analysis system (FPAS) to support a transition to an inflation forecast targeting regime in Sri Lanka. The FPAS model provides a relatively good forecast for inflation and a framework to evaluate policy trade-offs. The model simulations suggest that an open-economy inflation targeting rule can reduce macroeconomic volatility and anchor inflationary expectations given the size and type of shocks faced by the economy. Sri Lanka could aim to target a broad inflation range initially due to its susceptibility supply-side shocks while enhancing exchange rate flexibility and strengthening the effectiveness of monetary policy in the transition to an inflation forecast targeting regime.","PeriodicalId":178626,"journal":{"name":"ERN: Monetary & Fiscal Policies in Emerging Markets (Topic)","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115906892","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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