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The monetary sector under a currency board arrangement : specification and estimation of a model with Estonian data

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  • Rasmus Pikkani

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Abstract

Modelling work on Estonian data indicates that external financing of the private sector has strong impact on domestic demand, which implies that valuable insights may be gained in this case from understanding the behavioural relationships in the monetary sector. The current paper provides a theoretical analysis of the monetary sector under a currency board regime and applies specification tests to Estonian data. As a final product, empirical equations for average lending rate, loans provided to the private sector and money demand are estimated. While estimations herein use monthly data, quarterly modifications of the model will be inserted into Eesti Pank's quarterly macromodel in the future.

Suggested Citation

  • Rasmus Pikkani, 2000. "The monetary sector under a currency board arrangement : specification and estimation of a model with Estonian data," Bank of Estonia Working Papers 2000-4, Bank of Estonia, revised 13 Oct 2000.
  • Handle: RePEc:eea:boewps:wp2000-04
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    File URL: http://www.eestipank.ee/publikatsioon/toimetised/2000/index.pdf
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    References listed on IDEAS

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    1. Nadeem Ul Haque & Manmohan S. Kumar & Nelson Mark & Donald J. Mathieson, 1996. "The Economic Content of Indicators of Developing Country Creditworthiness," IMF Staff Papers, Palgrave Macmillan, vol. 43(4), pages 688-724, December.
    2. Cem Karacadag & Michael W. Taylor, 2000. "The New Capital Adequacy Framework: Institutional Constraints and Incentive Structures," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
    3. International Monetary Fund, 1998. "The Relative Importance of Political and Economic Variables in Creditworthiness Ratings," IMF Working Papers 98/46, International Monetary Fund.
    4. Christian B. Mulder & Brieuc Monfort, 2000. "Using Credit Ratings for Capital Requirementson Lending to Emerging Market Economies; Possible Impact of a New Basel Accord," IMF Working Papers 00/69, International Monetary Fund.
    5. Richard Cantor & Frank Packer, 1996. "Determinants and impact of sovereign credit ratings," Economic Policy Review, Federal Reserve Bank of New York, issue Oct, pages 37-53.
    6. Patrick Sabourin, "undated". "Analyzing and Forecasting Credit Ratings: Some Canadian Evidence," Working Papers-Department of Finance Canada 1999-02, Department of Finance Canada.
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    Cited by:

    1. Hannes Kaadu & Lenno Uuskula, 2004. "Liquidity Constrains and Ricardian Equivalence in Estonia," Bank of Estonia Working Papers 2004-7, Bank of Estonia, revised 10 Oct 2004.

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