Monetary Policy Transmission Mechanisms in Pacific Island Countries
During the global financial crisis, central banks in Pacific island countries eased monetary policy to stimulate economic activity. Judging by the ensuing movements in commercial bank interest rates and private sector credit, monetary policy transmission appears to be weak. This is confirmed by an empirical examination of interest rate pass-through and credit growth. Weak credit demand and underdeveloped financial markets seem to have limited the effectiveness of monetary policy, but the inflexibility of exchange rates and rising real interest rates have also served to frustrate the central banks’ efforts despite a supporting fiscal policy. While highlighting the importance of developing domestic financial markets in the long run, this experience also points to the need to coordinate macroeconomic policies and to use all macroeconomic tools available in conducting countercyclical policies, including exchange rate flexibility.
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Central Banking, Analysis, and Economic Policies Book Series,in: Luis Antonio Ahumada & J. Rodrigo Fuentes & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking Market Structure and Monetary Policy, edition 1, volume 7, chapter 5, pages 147-182
Central Bank of Chile.
- Alessandro Rebucci & Marco A Espinosa-Vega, 2003. "Retail Bank Interest Rate Pass-Through; Is Chile Atypical?," IMF Working Papers 03/112, International Monetary Fund.
- Marco A. Espinosa-Vega & Alessandro Rebucci, 2003. "Retail Bank Interest Rate Pass-Through: Is Chile Atypical?," Working Papers Central Bank of Chile 221, Central Bank of Chile.
- Kumar, Saten & Singh, Rup, 2009. "Some Empirical Evidence on the Demand for Money in the Pacific Island Countries," MPRA Paper 18703, University Library of Munich, Germany. Full references (including those not matched with items on IDEAS)