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How Effective is Monetary Transmission in Low-Income Countries? A Survey of the Empirical Evidence

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  • Prachi Mishra
  • Peter Montiel

Abstract

This paper surveys the evidence on the effectiveness of monetary transmission in low-income countries. It is hard to come away from this review with much confidence in the strength of monetary transmission in such countries. We distinguish between the "facts on the ground" and "methodological deficiencies" interpretations of the absence of evidence for strong monetary transmission. We suspect that "facts on the ground" are an important part of the story. If this conjecture is correct, the stabilization challenge in developing countries is acute indeed, and identifying the means of enhancing the effectiveness of monetary policy in such countries is an important challenge.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/143.

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Length: 48
Date of creation: 01 Jun 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/143

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Keywords: Banks; Developing countries; Eastern Europe; Monetary policy; Latin America; Low-income developing countries; Middle East and Central Asia; Monetary transmission mechanism; Transition economies; monetary transmission; aggregate demand; central bank; price level; real output; inflation; monetary aggregate; monetary fund; money stock; monetary base; government securities; foreign exchange; monetary authorities; money market; money demand; contractionary monetary policy; monetary economics; monetary policy transmission mechanism; monetary aggregates; inflation rate; discount rate; monetary policy instrument; monetary shocks; money market interest rates; monetary transmission mechanisms; monetary union; market for government securities; inflation targeting; rational expectations; aggregate demand effects; monetary policy regimes; discount rates; lower inflation; holdings of government securities; reserve ratios; central bank monetary policy; transmission of monetary policy; independent monetary policy; tight monetary policy; monetary policy instruments; real interest rates;

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References

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Cited by:
  1. Chance Mwabutwa & Manoel Bittencourt & Nicola Viegi, 2013. "Evolution of Monetary Policy Transmission Mechanism in Malawi: A TVP-VAR Approach," Working Papers 201327, University of Pretoria, Department of Economics.
  2. Hamid Reza Davoodi & S. V. S. Dixit & Gabor Pinter, 2013. "Monetary Transmission Mechanism in the East African Community," IMF Working Papers 13/39, International Monetary Fund.

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