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Monetary policy and excess liquidity: the case of Guyana

  • Khemraj, Tarron
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    This paper examines the monetary policy framework of Guyana. Guyana’s monetary Policy is motivated by the IMF’s financial programming model. The quantity of excess reserves in the banking system is seen as critical in determining bank credit and ultimately the external balance and inflationary pressures. Therefore, the central bank is always willing to mop up excess liquidity by selling Treasury bills. The paper examines the potential sources of persistent excess reserves. It then tests using the VAR methodology whether excess reserves exert the postulated effect on the price level and exchange rate.

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    File URL: https://mpra.ub.uni-muenchen.de/53126/1/MPRA_paper_53126.pdf
    File Function: original version
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 53126.

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    Date of creation: May 2007
    Date of revision:
    Publication status: Published in Social and Economic Studies 3.56(2007): pp. 101-127
    Handle: RePEc:pra:mprapa:53126
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    Web page: https://mpra.ub.uni-muenchen.de

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    1. P.R. Agenor & J. Aizenman & A. Hoffmaister, 2000. "The Credit Crunch in East Asia: What can Bank Excess Liquid Assets Tell us?," NBER Working Papers 7951, National Bureau of Economic Research, Inc.
    2. Baltensperger, Ernst, 1974. "The Precautionary Demand for Reserves," American Economic Review, American Economic Association, vol. 64(1), pages 205-10, March.
    3. Frost, Peter A, 1971. "Banks' Demand for Excess Reserves," Journal of Political Economy, University of Chicago Press, vol. 79(4), pages 805-25, July-Aug..
    4. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
    5. Baltensperger, Ernst, 1980. "Alternative approaches to the theory of the banking firm," Journal of Monetary Economics, Elsevier, vol. 6(1), pages 1-37, January.
    6. Ping Wang & Paul Dunne, 2003. "Real Exchange Rate Fluctuations in East Asia: Generalized Impulse-Response Analysis," Asian Economic Journal, East Asian Economic Association, vol. 17(2), pages 185-203, 06.
    7. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
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