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Monetary Transmission in Low Income Countries

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  • Peter Montiel
  • Antonio Spilimbergo
  • Prachi Mishra

Abstract

This paper reviews monetary transmission mechanisms in low-income countries (LICs) to identify aspects of the channels that may operate differently in LICs relative to advanced and emerging economies. Given the weak institutional frameworks, reduced role of securities markets, imperfect competition in the banking sector and the resulting high cost of bank lending to private firms, the traditional channels (interest rate, bank lending, and asset price) are impaired in LICs. The exchange rate channel is also undermined by central bank intervention in the foreign exchange market. These conclusions are supported by review of the institutional frameworks, statistical analysis, and previous literature.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/223.

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Length: 42
Date of creation: 01 Oct 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/223

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Keywords: Banks; Banking sector; Central bank policy; Exchange rates; Financial institutions; Financial intermediation; Low-income developing countries; Monetary transmission mechanism; Monetary policy; bank lending; monetary transmission; central bank; government securities; money market; bank lending rates; aggregate demand; banking; bank credit; bank policy; discount rate; monetary fund; bank loans; inflation; discount rates; short-term government securities; bank independence; capital mobility; long-term interest rates; interbank market; market for government securities; monetary policy instruments; bank reserves; foreign exchange; transmission of monetary policy; monetary policy transmission mechanism; bank loan; monetary transmission mechanisms; bank lending rate; banks ? balance sheets; open market transactions; bank loan rates; banking sectors; monetary community; monetary shock; bank intervention; banking systems; bank interest; excess liquidity; money stock; monetary base; monetary policy implementation; bank interest rate; monetary shocks; monetary policy instrument; banking system; banking industry; long-term government securities; bank portfolio; bank profit; monetary instruments; macroeconomic stabilization; foreign asset; banking environment; bank rate; monetary expansion; bank balance sheet; bank assets; bank competition; money market interest rates; real aggregate demand; money supply; monetary policy frameworks; bank portfolios; bank balance sheets; tight monetary policy; bank charges; foreign exchange market; rediscount rate; monetary union; demand for money; bank lending behavior; bank behavior; macroeconomic stabilization policy; monetary autonomy; reserve ratios; bank transparency; reserve ratio; holdings of government securities; central bank monetary policy; net interest margin;

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References

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Citations

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Cited by:
  1. Bhattacharya, Rudrani & Patnaik, Ila & Shah, Ajay, 2011. "Monetary policy transmission in an emerging market setting," Working Papers 11/78, National Institute of Public Finance and Policy.
  2. International Monetary Fund, 2011. "Monetary Transmission in Dollarized and Non-Dollarized Economies," IMF Working Papers 11/87, International Monetary Fund.
  3. Mauricio Moura & Caio Piza & Marcos Poplawski-Ribeiro, 2011. "The Distributive Effects of Land Titleon Labor Supply," IMF Working Papers 11/131, International Monetary Fund.
  4. Nikoloz Gigineishvili, 2011. "Determinants of Interest Rate Pass-Through," IMF Working Papers 11/176, International Monetary Fund.
  5. Muhammad-Bashir Owolabi Yusuf & Gairuzazmi Mat Ghani & Ahamed Kameel Mydin Meera, 2013. "The Challenges of Implementing Gold Dinar in Kelantan: An Empirical Analysis," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 5(3), pages 97-114, October.
  6. Jamilov, Rustam, 2012. "Channels of Monetary Transmission in the CIS," MPRA Paper 39568, University Library of Munich, Germany.

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