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The Monetary Transmission Mechanism in Jordan

  • Tushar Poddar
  • Hasmik Khachatryan
  • Randa Sab
Registered author(s):

    This paper examines monetary transmission in Jordan using the vector autoregressive approach. We find that the real 3-month CD rate, the Central Bank's operating target, affects bank retail rates and that monetary policy, measured by the spread between the 3-month CD rate and the U.S. Federal Funds rate, is effective in influencing foreign reserves. We do not find evidence of monetary policy affecting output. Output responds very little to changes in bank lending rates. Furthermore, equity prices and the exchange rate are not significant channels for transmitting monetary policy to economic activity. The effect of monetary policy on the stock market seems insignificant.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=18841
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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/48.

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    Length: 28
    Date of creation: 01 Feb 2006
    Date of revision:
    Handle: RePEc:imf:imfwpa:06/48
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    1. C. John McDermott & Paul Cashin, 1995. "Informational Efficiency in Developing Equity Markets," IMF Working Papers 95/58, International Monetary Fund.
    2. Piti Disyatat & Pinnarat Wongsinsirikul, 2002. "Monetary Policy and the Transmission Mechanism in Thailand," Working Papers 2002-01, Economic Research Department, Bank of Thailand.
    3. Frederic S. Mishkin, 1996. "The Channels of Monetary Transmission: Lessons for Monetary Policy," NBER Working Papers 5464, National Bureau of Economic Research, Inc.
    4. Chen, Gong-meng & Firth, Michael & Rui, Oliver M, 2001. "The Dynamic Relation between Stock Returns, Trading Volume, and Volatility," The Financial Review, Eastern Finance Association, vol. 36(3), pages 153-73, August.
    5. Tamim Bayoumi & James Morsink, 1999. "A Peek Inside the Black Box; The Monetary Transmission Mechanism in Japan," IMF Working Papers 99/137, International Monetary Fund.
    6. Jeremy C. Stein & Anil K. Kashyap, 2000. "What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?," American Economic Review, American Economic Association, vol. 90(3), pages 407-428, June.
    7. Angeliki Kourelis & Carlo Cottarelli, 1994. "Financial Structure, Bank Lending Rates, and the Transmission Mechanism of Monetary Policy," IMF Working Papers 94/39, International Monetary Fund.
    8. John B. Taylor, 1995. "The monetary transmission mechanism: an empirical framework," Working Papers in Applied Economic Theory 95-07, Federal Reserve Bank of San Francisco.
    9. Carlo Cottarelli & Angeliki Kourelis, 1994. "Financial Structure, Bank Lending Rates, and the Transmission Mechanism of Monetary Policy," IMF Staff Papers, Palgrave Macmillan, vol. 41(4), pages 587-623, December.
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