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Monetary Policy and Inflation-Output Variability in Sri Lanka: Lessons for Developing Economies

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  • Kesavarajah Mayandy
  • Paul Middleditch

Abstract

This paper examines the impact of monetary policy on the inflation-output variability trade-off for Sri Lanka, drawing monetary policy lessons for developing economies. We examine how this trade-off has changed across different monetary policy episodes, and investigate the persistence of the variability of inflation and output after supply and demand shocks. Finally we explore the contribution of monetary policy to macroeconomic performance more generally. Learning from the experience of Sri Lanka, our findings suggest that more recently formed central banks should focus on inflation variability, especially where the impact of demand and supply shocks are less persistent.

Suggested Citation

  • Kesavarajah Mayandy & Paul Middleditch, 2020. "Monetary Policy and Inflation-Output Variability in Sri Lanka: Lessons for Developing Economies," Economics Discussion Paper Series 2001, Economics, The University of Manchester.
    • Handle: RePEc:man:sespap:2001
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    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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