IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-15-00548.html
   My bibliography  Save this article

Relative Importance of Monetary Transmission Mechanism in Sri Lanka: An Empirical Investigation

Author

Listed:
  • Sooriyakumar Krishnapillai

    (University of Jaffna)

  • Vairavipillai pasupathy Sivanathan

    (University of Jaffna)

  • Anushiya Sireeranhan

    (University of Jaffna)

Abstract

This paper studies various monetary transmission channels in Sri Lanka to identify the more effective transmission mechanism and the policy rate that signals changes in monetary policy more effectively. The standard recursive Structural Vector Autoregression (SVAR) models are used to analyze monetary transmission mechanism. Impulse response of output to a one standard deviation positive shock in reserve money indicates that credit channel is more effective transmission channel than interest rate and exchange rate channel in Sri Lanka and repo rate is the policy rate that signals the changes in monetary policy more effectively.

Suggested Citation

  • Sooriyakumar Krishnapillai & Vairavipillai pasupathy Sivanathan & Anushiya Sireeranhan, 2016. "Relative Importance of Monetary Transmission Mechanism in Sri Lanka: An Empirical Investigation," Economics Bulletin, AccessEcon, vol. 36(1), pages 560-568.
    • Handle: RePEc:ebl:ecbull:eb-15-00548
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2016/Volume36/EB-16-V36-I1-P55.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Montiel, Peter J & Spilimbergo, Antonio & Mishra, Prachi, 2010. "Monetary transmission in low income countries," CEPR Discussion Papers 7951, C.E.P.R. Discussion Papers.
    2. Rafiq, M.S. & Mallick, S.K., 2008. "The effect of monetary policy on output in EMU3: A sign restriction approach," Journal of Macroeconomics, Elsevier, vol. 30(4), pages 1756-1791, December.
    3. Ramey, Valerie, 1993. "How important is the credit channel in the transmission of monetary policy?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 1-45, December.
    4. Mishra, Prachi & Montiel, Peter, 2013. "How effective is monetary transmission in low-income countries? A survey of the empirical evidence," Economic Systems, Elsevier, vol. 37(2), pages 187-216.
    5. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148, Elsevier.
    6. Alam, Tasneem & Waheed, Muhammad, 2006. "The monetary transmission mechanism in Pakistan: a sectoral analysis," MPRA Paper 2719, University Library of Munich, Germany, revised 13 Apr 2007.
    7. Frederic S. Mishkin, 1996. "The Channels of Monetary Transmission: Lessons for Monetary Policy," NBER Working Papers 5464, National Bureau of Economic Research, Inc.
    8. Perera, Anil & Ralston, Deborah & Wickramanayake, Jayasinghe, 2013. "Central bank financial strength and inflation: Is there a robust link?," Journal of Financial Stability, Elsevier, vol. 9(3), pages 399-414.
    9. Mr. Jonathan C Dunn & Mr. Matt Davies & Yongzheng Yang & Mr. Yiqun Wu & Mr. Shengzu Wang, 2011. "Monetary Policy Transmission Mechanisms in Pacific Island Countries," IMF Working Papers 2011/096, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ghazanchyan, Manuk, 2014. "Unraveling the Monetary Policy Transmission Mechanism in Sri Lanka," MPRA Paper 59444, University Library of Munich, Germany.
    2. Guizani, Brahim, 2015. "Effectiveness of Monetary Policy In Economies in Democratic Transition: Evidence from Tunisia," MPRA Paper 63205, University Library of Munich, Germany.
    3. Hénock Muanza Katuala, 2020. "Monetary Policy, Monetary Stability And Economic Growth In The Democratic Republic Of Congo [Politique Monetaire, Stabilite Monetaire Et Croissance Economique En Republique Democratique Du Congo]," Working Papers hal-02616124, HAL.
    4. Jorge David Quintero Otero, 2015. "Impactos de la política monetaria y canales de transmisión en países de América Latina con esquema de inflación objetivo," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República, vol. 33(76), pages 61-75, April.
    5. Mr. Hamid R Davoodi & S. V. S. Dixit & Gabor Pinter, 2013. "Monetary Transmission Mechanism in the East African Community: An Empirical Investigation," IMF Working Papers 2013/039, International Monetary Fund.
    6. Li, Huan & Ni, Jinlan & Xu, Yueli & Zhan, Minghua, 2021. "Monetary policy and its transmission channels: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).
    7. Mishra, Prachi & Montiel, Peter, 2013. "How effective is monetary transmission in low-income countries? A survey of the empirical evidence," Economic Systems, Elsevier, vol. 37(2), pages 187-216.
    8. Hsiao Chink Tang, 2006. "The Relative Importance Of Monetary Policy Transmission Channels In Malaysia," CAMA Working Papers 2006-23, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    9. Lan Nguyen, Thi Mai & Papyrakis, Elissaios & van Bergeijk, Peter A.G., 2021. "Publication bias in the price effects of monetary policy: A meta-regression analysis for emerging and developing economies," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 567-583.
    10. van Holle, Frederiek, 2017. "Essays in empirical finance and monetary policy," Other publications TiSEM 30d11a4b-7bc9-4c81-ad24-5, Tilburg University, School of Economics and Management.
    11. Perera, Anil & Wickramanayake, J., 2016. "Determinants of commercial bank retail interest rate adjustments: Evidence from a panel data model," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 45(C), pages 1-20.
    12. Anthony M. Simpasa & Boaz Nandwa & Tiguéné Nabassaga, 2014. "Working Paper - 211 - Bank Lending Channel of Monetary Policy Transmission in Zambia: Evidence from Bank-Level Data," Working Paper Series 2147, African Development Bank.
    13. Roy, Ripon & Bashar, Omar H.N.M. & Bhattacharya, Prasad Sankar, 2023. "The cross-industry effects of monetary policy: New evidence from Bangladesh," Economic Modelling, Elsevier, vol. 127(C).
    14. Montiel, Peter J & Spilimbergo, Antonio & Mishra, Prachi, 2011. "How Effective Is Monetary Transmission in Developing Countries? A Survey of the Empirical Evidence," CEPR Discussion Papers 8577, C.E.P.R. Discussion Papers.
    15. Patrick A. Imam, 2015. "Shock from Graying: Is the Demographic Shift Weakening Monetary Policy Effectiveness," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 20(2), pages 138-154, March.
    16. Ben R. Craig & Joseph G. Haubrich, 2013. "Gross Loan Flows," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(2-3), pages 401-421, March.
    17. Kaelo Mpho Ntwaepelo, 2021. "The Effects of Macroprudential and Monetary Policy Shocks in BRICS economies," Economics Discussion Papers em-dp2021-20, Department of Economics, University of Reading.
    18. M. Hakan Berument & Nukhet Dogan & Aysit Tansel, 2009. "Macroeconomic Policy and Unemployment by Economic Activity: Evidence from Turkey," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 45(3), pages 21-34, May.
    19. Silvia Miranda-Agrippino & Giovanni Ricco, 2021. "The Transmission of Monetary Policy Shocks," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(3), pages 74-107, July.
    20. Ahmet Benlialper & Hasan Cömert, 2016. "Implicit asymmetric exchange rate peg under inflation targeting regimes: the case of Turkey," Cambridge Journal of Economics, Oxford University Press, vol. 40(6), pages 1553-1580.

    More about this item

    Keywords

    Monetary transmission mechanism; Structural Vector Auto Regression; Impulse response;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-15-00548. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.