IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v35y2003i4p437-448.html
   My bibliography  Save this article

Independence of monetary policy under fixed exchange rates: the case of Saudi Arabia

Author

Listed:
  • Krishna Akikina
  • Hamed Al-Hoshan

Abstract

This study specifies a modified version of the monetary approach to the balance of payments (MABP) model with free capital flow and fixed exchange rates for Saudi Arabia, and tests the independence of monetary policy of its central bank using annual data from 1960 to 1994. Further, capital flight and speculative inventory behaviour of importers of consumer and capital goods in Saudi Arabia are also tested to the expected exchange rate depreciation during the periods of exchange turmoil against the riyal. The results of this study indicate that Saudi Arabian Monetary Authority has at best a weak control on its money supply which is in accord with one of the predictions of MABP theory. Further, the study found little support to the speculative inventory behaviour of the importers of consumer and capital goods in Saudi Arabia against exchange rate depreciation of the riyal. However, the results suggest that the expected change in exchange rate depreciation has a positive and a significant impact on capital flight in Saudi Arabia.

Suggested Citation

  • Krishna Akikina & Hamed Al-Hoshan, 2003. "Independence of monetary policy under fixed exchange rates: the case of Saudi Arabia," Applied Economics, Taylor & Francis Journals, vol. 35(4), pages 437-448.
  • Handle: RePEc:taf:applec:v:35:y:2003:i:4:p:437-448
    DOI: 10.1080/00036840210148049
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840210148049
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. E.O. Svensson, Lars, 1994. "Why exchange rate bands? : Monetary independence in spite of fixed exchange rates," Journal of Monetary Economics, Elsevier, vol. 33(1), pages 157-199, February.
    2. Nadeem U. Haque & Kajal Lahiri & Peter J. Montiel, 1990. "A Macroeconometric Model for Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 37(3), pages 537-559, September.
    3. Daniel M. Laskar, 1983. "Short-Run Independence of Monetary Policy under a Pegged Exchange-Rates System: An Econometric Approach," NBER Chapters,in: The International Transmission of Inflation, pages 314-348 National Bureau of Economic Research, Inc.
    4. Kouri, Pentti J K & Porter, Michael G, 1974. "International Capital Flows and Portfolio Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 82(3), pages 443-467, May/June.
    5. Lee E. Ohanian & Alan C. Stockman, 1997. "Short-run independence of monetary policy under pegged exchange rates and effects of money on exchange rates and interest rates," Proceedings, Federal Reserve Bank of Cleveland, pages 783-814.
    Full references (including those not matched with items on IDEAS)

    More about this item

    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:taf:applec:v:35:y:2003:i:4:p:437-448. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.