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Monetary Policy Transmission and Targeting Mechanisms in the MENA Region

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  • Simon Neaime

    () (Department of Economics, Institute of Financial Economics, American University of Beirut)

Abstract

Since the early 1990s some industrialized economies have implemented a monetary policy regime shift known as inflation targeting. This shift was justified by the difficulties posed by targeting the nominal exchange rate, or in some instances money supply. Given the very encouraging experience of developed countries, a number of MENA countries decided to adopt price stability as an explicit monetary policy objective. Using sophisticated time series econometric techniques, this study aims to highlight the monetary transmission mechanism across the region, and to assess how successful the MENA countries have been in making a smooth transition to inflation targeting. The empirical results indicate that the recent success of Turkey and Egypt in adopting flexible exchange rates has helped those countries shift to an inflation targeting regime. It is also shown that Jordan, Lebanon, Morocco and Tunisia will have to introduce more flexibility into their exchange rates before they can shift to an inflation targeting monetary policy regime. Other empirical results indicate that for Egypt and Turkey, the exchange rate played a dominant role in the transmission mechanism of monetary policy, while for Jordan, Lebanon, Morocco, and Tunisia it was the interest rate that played the dominant role.

Suggested Citation

  • Simon Neaime, 2008. "Monetary Policy Transmission and Targeting Mechanisms in the MENA Region," Working Papers 395, Economic Research Forum, revised 03 Jan 2008.
  • Handle: RePEc:erg:wpaper:395
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    References listed on IDEAS

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    Cited by:

    1. Adnen Chockri & Ibticem Frihka, 2011. "La portée de la politique de ciblage d’inflation: Approche analytique et empirique pour le cas Tunisien," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(1), pages 91-111, March.
    2. Sanchita Mukherjee & Rina Bhattacharya, 2015. "Do the Keynesian monetary transmission mechanisms work in the MENA region?," Empirical Economics, Springer, vol. 48(3), pages 969-982, May.
    3. Dahem, Ahlem & Siala Guermazi, Fatma, 2016. "Exchange rate Pass-through and Monetary Policy in Transition Economy: Evidence from Tunisia with disaggregated VAR Analysis," MPRA Paper 74179, University Library of Munich, Germany.
    4. Ziaei, Sayyed Mahdi, 2009. "Assess The Long Run Effects Of Monetary Policy On Bank lending,Foreign Asset and Liability In MENA Countries," MPRA Paper 14331, University Library of Munich, Germany.
    5. Darine Ghanem, 2010. "Fixed Exchange Rate Regimes and Price Stability: Evidence from MENA Countries," Working Papers 10-16, LAMETA, Universtiy of Montpellier, revised Nov 2010.
    6. Guizani, Brahim, 2015. "Effectiveness of Monetary Policy In Economies in Democratic Transition: Evidence from Tunisia," MPRA Paper 63205, University Library of Munich, Germany.
    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. repec:ers:ijebaa:v:iv:y:2016:i:4:p:50-63 is not listed on IDEAS
    9. Sanchita Mukherjee & Rina Bhattacharya, 2011. "Inflation Targeting and Monetary Policy Transmission Mechanisms in Emerging Market Economies," IMF Working Papers 11/229, International Monetary Fund.
    10. Garcia-Kilroy, Catiana & Silva, Anderson Caputo, 2011. "Reforming government debt markets in MENA," Policy Research Working Paper Series 5611, The World Bank.
    11. Mishra, Prachi & Montiel, Peter J & Spilimbergo, Antonio, 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.
    12. Belhadj, Aam, 2009. "Heterogeneity of the Maghreb: the results of optimized monetary rules," MPRA Paper 40374, University Library of Munich, Germany.

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