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Monetary Policy Implementation at Different Stages of Market Development


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  • Bernard Laurens
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    The most salient trend in monetary policy over the past two decades has been increasing reliance on money market operations, which reflects the belief that allowing market forces to allocate financial resources brings about increased economic efficiency and growth. However, small economies and countries with undeveloped financial markets have found that a lack of competition in their financial markets complicates their efforts to rely on money market operations, at times forcing them to rely instead on direct instruments or moral suasion. In some larger countries, the shift toward a reliance on money market operations has been gradual and, at times, fraught with difficulty. This report draws on a variety of country experiences to analyze the reasons for such difficulties and proposes a stylized sequencing of reforms that enables countries to tailor the introduction of money market operations to their particular circumstances.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Occasional Papers with number 244.

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    Length: 105
    Date of creation: 20 Dec 2005
    Date of revision:
    Handle: RePEc:imf:imfocp:244

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    Keywords: Money markets; money market; monetary policy; central bank; reserve requirements; money market operations; government securities; inflation; financial system; financial sector; liquidity management; money market instruments; rediscount; monetary fund; monetary policy instruments; financial markets; financial intermediation; rediscount rate; monetary instruments; reserve requirement; financial institutions; monetary policy implementation; discount rate; bonds; financial systems; open market operations; liquid asset; government securities market; monetary union; government bonds; transmission of monetary policy; financial market; deposit rates; monetary transmission; monetary stability; monetary framework; monetary program; cash flow; interest rate controls; monetary policy instrument; monetary instrument; international reserves; bond; independent monetary policy; financial liberalization; monetary aggregates; market for government securities; official reserves; flexible exchange rate; financial reforms; monetary policy operations; monetary management; national bank; stock exchange; aggregate demand; monetary policy framework; money market rates; monetary authorities; nominal exchange rate; monetary conditions; exchange rate; interest rate policy; money supply; financial structure; monetary policy frameworks; stock market; international banks; deposit money banks; rediscount rates; deposit money; monetary base; monetary policy independence; financial resources; money market interest rates; financial instruments; monetary unions; deposit rate; monetary transmission mechanism; monetary transmission mechanisms; monetary policy decisions; monetary control; savings deposits; financial assets; bond markets; financial services; government securities markets; holdings of government securities; financial stability; monetary integration; monetary aggregate; monetary unit; public debt; money demand; government bond; monetary frameworks; central banks; monetary area; monetary expansion; debt stock; monetary policy operating procedures; cash flows; domestic monetary cooperation; secondary market in government securities; financial policies; exchange rate regime; foreign exchange; domestic government securities; equity markets; international standards; money market interest; money market rate; minimum reserve requirements; financial repression; monetary objectives; systemic banking crises; government security; domestic interest rates; monetary policy decision; high reserve requirement; discounting; financial statements; equity market; rate bonds; monetary reforms; tight monetary policy; stock market capitalization; monetary economics; monetary sector; deposit insurance; reserve ratios; valuation of securities; domestic financial system; cost of credit; monetary growth; bond yields; present value; monetary system; government bond yields; monetary arrangements; investments in government securities; monetary liabilities; treasury securities; eurobond; outstanding bonds; interest rate fluctuations; money transfer; monetary institutions; financial reform; foreign equity; flexible exchange rate system; monetary policies; liquidity ratio; outstanding government securities; corporate bonds; net present value; cash flow problems; equity capital; developing government bond markets; monetary decisions; alternative monetary policy framework; monetary policy rules; issuance of government securities; money market operation; derivatives markets; monetary authority; monetary policy transparency; interest rate liberalization; government bond markets; demand for money; financial globalization; monetary regimes; government securities auctions; currency risk; financial intermediaries; financial sector development; government cash flow; financial market development; monetary stance; developing government bond; monetary objective; term bond; long-term bond markets; bond prices; debt management; public debt management; floating exchange rate; foreign exchange market; flexible exchange rate regime; floating exchange rate regime; equilibrium exchange rate; exchange rate flexibility; exchange rate volatility; reserve management; foreign aid; debt management strategies; current account;


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    1. Carmen Reinhart & Mohsin S. Khan, 1995. "Capital Flows in the APEC Region," IMF Occasional Papers 122, International Monetary Fund.
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    Cited by:
    1. Bernard Laurens & Rodolfo Maino, 2007. "China," IMF Working Papers 07/14, International Monetary Fund.


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