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Procyclical Monetary Policy and Governance

  • Choudhary, M. Ali
  • Hanif, M. Nadim
  • Khan, Sajawal
  • Rehman, Muhammad

Weak governance adversely affects firm’s net worth and consequently the value of its collateral. This negative impact on the collateral reduces the external credit available for importing inputs constraining potential output. As a result, a stronger procyclical monetary policy stance is adopted for protecting the exchange rate and hence arresting the degradation in the collateral constraint.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27022.

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Date of creation: Nov 2010
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Handle: RePEc:pra:mprapa:27022
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  1. Comin, Diego & Loayza, Norman & Pasha, Farooq & Serven, Luis, 2009. "Medium-term business cycles in developing countries," Policy Research Working Paper Series 5146, The World Bank.
  2. Frankel, Jeffrey, 2010. "Monetary Policy in Emerging Markets," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 25, pages 1439-1520 Elsevier.
  3. Sala-I-Martin, X. & Barro, R.J., 1991. "Public Finance in Models of Economic Growth," Papers 640, Yale - Economic Growth Center.
  4. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
  5. Michael B. Devereux & Philip R. Lane, 2002. "Understanding Bilateral Exchange Rate Volatility," Trinity Economics Papers 200211, Trinity College Dublin, Department of Economics.
  6. Choudhary, M. Ali & Levine, Paul, 2006. "Idle worship," Economics Letters, Elsevier, vol. 90(1), pages 77-83, January.
  7. Frankel, Jeffrey A., 2011. "Monetary Policy in Emerging Markets: A Survey," Scholarly Articles 4669671, Harvard Kennedy School of Government.
  8. Huang, Haizhou & Wei, Shang-Jin, 2006. "Monetary policies for developing countries: The role of institutional quality," Journal of International Economics, Elsevier, vol. 70(1), pages 239-252, September.
  9. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  10. César Calderón & Roberto Duncan & Klaus Schmidt-Hebbel, 2004. "Institutions and Cyclical Properties of Macroeconomic Policies," Working Papers Central Bank of Chile 285, Central Bank of Chile.
  11. Campos, Nauro F., 2000. "Context is everything : measuring institutional change in transition economies," Policy Research Working Paper Series 2269, The World Bank.
  12. Devereux, Michael B & Poon, Doris, 2004. "A Simple Model of Optimal Monetary Policy with Financial Constraints," CEPR Discussion Papers 4370, C.E.P.R. Discussion Papers.
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