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Understanding the Relationship between Financial Development and Monetary Policy

Author

Listed:
  • Luis Carranza

    (Universidad San Martín de Porres)

  • José Enrique Galdón Sánchez

    (Universidad Pública de Navarra)

  • Javier Gómez Biscarri

    (Universitat Pompeu Fabra)

Abstract

In this paper we summarize the results of a broad exploratory empirical analysis where we relate the level of financial development with the effectiveness of monetary policy. The analysis is based on a panel of countries for whom we calculate measures both of financial development and of monetary policy effectiveness. We look for statistically significant relationships between the indicators of financial development, the effectiveness coefficients and other macroeconomic characteristics by estimating dynamic panels and performing a cluster analysis. We present our results in the form of a list of stylized facts that we consider deserve further attention.

Suggested Citation

  • Luis Carranza & José Enrique Galdón Sánchez & Javier Gómez Biscarri, 2006. "Understanding the Relationship between Financial Development and Monetary Policy," Faculty Working Papers 14/06, School of Economics and Business Administration, University of Navarra.
    • Handle: RePEc:una:unccee:wp1406
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    Cited by:

    1. Ma, Yong & Lin, Xingkai, 2016. "Financial development and the effectiveness of monetary policy," Journal of Banking & Finance, Elsevier, vol. 68(C), pages 1-11.
    2. Ekpeno L. Effiong & Godwin E. Esu & Chuku Chuku, 2020. "Financial development and monetary policy effectiveness in Africa," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 22(1), pages 160-181, June.
    3. Kimolo, Deogratius & Bashagi, Asimwe & Sanga, Mollel, 2019. "Assessment of Monetary Policy Transmission Mechanism in Tanzania," MPRA Paper 114651, University Library of Munich, Germany.
    4. Sanfilippo-Azofra, Sergio & Torre-Olmo, Begoña & Cantero-Saiz, María & López-Gutiérrez, Carlos, 2018. "Financial development and the bank lending channel in developing countries," Journal of Macroeconomics, Elsevier, vol. 55(C), pages 215-234.
    5. Ranjan Kumar Mohanty & N R Bhanumurthy, 2020. "Asymmetric Monetary Policy Transmission in India:Does Financial Friction Matter?," BASE University Working Papers 03/2020, BASE University, Bengaluru, India.

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    More about this item

    Keywords

    Financial Development; Monetary Policy Effectiveness; Dynamic Panel; Empirical Measures;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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