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A Segmented Markets Model to Teach Analysis of Monetary Policy Shocks in Developing Economies

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  • Waknis, Parag

Abstract

The standard undergraduate textbook models in macroeconomics like the IS-LM/AD-AS model are not disaggregated enough to understand the effects of monetary policy shocks in developing economies typically characterized by substantial informality, and goods and financial markets segmentation. In this paper, I present a version of a segmented markets model based on Williamson (2009, 2011) that could be used as an effective alternative. I demonstrate the use of the framework by analyzing the effects of demonetization- a substantial reduction in the availability of outside money- in a developing country setting.

Suggested Citation

  • Waknis, Parag, 2017. "A Segmented Markets Model to Teach Analysis of Monetary Policy Shocks in Developing Economies," MPRA Paper 78011, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:78011
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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