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The Monetary Transmission Mechanism in Jordan

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Author Info
Tushar Poddar
Hasmik Khachatryan
Randa Sab
Abstract

This paper examines monetary transmission in Jordan using the vector autoregressive approach. We find that the real 3-month CD rate, the Central Bank's operating target, affects bank retail rates and that monetary policy, measured by the spread between the 3-month CD rate and the U.S. Federal Funds rate, is effective in influencing foreign reserves. We do not find evidence of monetary policy affecting output. Output responds very little to changes in bank lending rates. Furthermore, equity prices and the exchange rate are not significant channels for transmitting monetary policy to economic activity. The effect of monetary policy on the stock market seems insignificant.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/48.

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Length: 28 pages
Date of creation: 02 Mar 2006
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Handle: RePEc:imf:imfwpa:06/48

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Keywords: Monetary policy ; Jordan ; Bank rates ; Foreign exchange reserves ; Stock markets ; Exchange rates ; Economic models ;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
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  1. Taylor, John B, 1995. "The Monetary Transmission Mechanism: An Empirical Framework," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 11-26, Fall. [Downloadable!] (restricted)
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  2. Disyatat, Piti & Vongsinsirikul, Pinnarat, 2003. "Monetary policy and the transmission mechanism in Thailand," Journal of Asian Economics, Elsevier, vol. 14(3), pages 389-418, June. [Downloadable!] (restricted)
  3. Anil K. Kashyap & Jeremy C. Stein, 2000. "What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?," American Economic Review, American Economic Association, vol. 90(3), pages 407-428, June. [Downloadable!] (restricted)
  4. Carlo Cottarelli & Angeliki Kourelis, 1994. "Financial Structure, Bank Lending Rates, and the Transmission Mechanism of Monetary Policy," IMF Working Papers 94/39, International Monetary Fund.
  5. Frederic S. Mishkin, 1996. "The Channels of Monetary Transmission: Lessons for Monetary Policy," NBER Working Papers 5464, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Paul Cashin & C. John McDermott, 1995. "Informational Efficiency in Developing Equity Markets," IMF Working Papers 95/58, International Monetary Fund.
  7. Chen, Gong-meng & Firth, Michael & Rui, Oliver M, 2001. "The Dynamic Relation between Stock Returns, Trading Volume, and Volatility," The Financial Review, Eastern Finance Association, vol. 36(3), pages 153-73, August.
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ziaei, Sayyed Mahdi, 2009. "Assess The Long Run Effects Of Monetary Policy On Bank lending,Foreign Asset and Liability In MENA Countries," MPRA Paper 14331, University Library of Munich, Germany. [Downloadable!]
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