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Measuring and Mending Monetary Policy Effectiveness Under Capital Account Restrictions; Lessons from Mauritania

  • Robert Blotevogel
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    I propose a new approach to identifying exogenous monetary policy shocks in low-income countries with capital account restrictions. In the case of Mauritania, a domestic repatriation requirement is the key institutional characteristic that allows me to establish exogeneity. Unlike in advanced countries, I find no evidence for a statistically significant impact of exogenous monetary policy shocks on bank lending. Using a unique bank-level dataset on monthly balance sheets of six Mauritanian banks over the period 2006–11, I estimate structural vector autoregressions and two-stage least square panel models to demonstrate the ineffectiveness of monetary policy. Finally, I discuss how a reduction in banks’ loan concentration ratios and improvements in the liquidity management framework could make monetary stimuli more effective.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 13/77.

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    Length: 35
    Date of creation: 27 Mar 2013
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    Handle: RePEc:imf:imfwpa:13/77
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