IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/53126.html
   My bibliography  Save this paper

Monetary policy and excess liquidity: the case of Guyana

Author

Listed:
  • Khemraj, Tarron

Abstract

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.

Suggested Citation

  • Khemraj, Tarron, 2007. "Monetary policy and excess liquidity: the case of Guyana," MPRA Paper 53126, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:53126
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/53126/1/MPRA_paper_53126.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Frost, Peter A, 1971. "Banks' Demand for Excess Reserves," Journal of Political Economy, University of Chicago Press, vol. 79(4), pages 805-825, July-Aug..
    2. Agenor, Pierre-Richard & Aizenman, Joshua & Hoffmaister, Alexander W., 2004. "The credit crunch in East Asia: what can bank excess liquid assets tell us?," Journal of International Money and Finance, Elsevier, vol. 23(1), pages 27-49, February.
    3. Baltensperger, Ernst, 1974. "The Precautionary Demand for Reserves," American Economic Review, American Economic Association, vol. 64(1), pages 205-210, March.
    4. Mr. Tomás J. T. Baliño & Mr. Charles Enoch & Mr. William E. Alexander, 1995. "The Adoption of Indirect Instruments of Monetary Policy," IMF Occasional Papers 1995/008, International Monetary Fund.
    5. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
    6. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    7. 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, June.
    8. Marc Lavoie, 1984. "The Endogenous Flow of Credit and the Post Keynesian Theory of Money," Journal of Economic Issues, Taylor & Francis Journals, vol. 18(3), pages 771-797, September.
    9. Mr. Magnus Saxegaard, 2006. "Excess Liquidity and Effectiveness of Monetary Policy: Evidence from Sub-Saharan Africa," IMF Working Papers 2006/115, International Monetary Fund.
    10. Baltensperger, Ernst, 1980. "Alternative approaches to the theory of the banking firm," Journal of Monetary Economics, Elsevier, vol. 6(1), pages 1-37, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Keyra Primus, 2016. "The Effectiveness of Monetary Policy in Small Open Economies: An Empirical Investigation," IMF Working Papers 2016/189, International Monetary Fund.
    2. Primus, Keyra, 2013. "Excess Reserves, Monetary Policy and Financial Volatility," MPRA Paper 51670, University Library of Munich, Germany.
    3. Primus, Keyra, 2017. "Excess reserves, monetary policy and financial volatility," Journal of Banking & Finance, Elsevier, vol. 74(C), pages 153-168.
    4. Primus, Keyra, 2018. "The effectiveness of monetary policy in small open economies," Journal of Policy Modeling, Elsevier, vol. 40(5), pages 903-933.
    5. Keyra Primus, 2013. "'Excess Reserves, Monetary Policy and Financial Volatility," Centre for Growth and Business Cycle Research Discussion Paper Series 183, Economics, The University of Manchester.
    6. Khemraj, Tarron, 2007. "The missing link: the finance-growth nexus and the Guyanese growth stagnation," MPRA Paper 16342, University Library of Munich, Germany.
    7. Md Gyasuddin Ansari & Rudra Sensarma, 2022. "What Explains Excess Liquidity of Banks? Empirical Evidence from India," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 21(4), pages 477-503, December.
    8. Anderson-Reid, Karen, 2011. "Excess reserves in Jamaican Commercial Banks: The implications for Monetary Policy," MPRA Paper 43663, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tarron Khemraj, 2009. "Excess liquidity and the foreign currency constraint: the case of monetary management in Guyana," Applied Economics, Taylor & Francis Journals, vol. 41(16), pages 2073-2084.
    2. Djelassi, Mouldi & Boukhatem, Jamel, 2020. "Modelling liquidity management in Islamic banks from a microeconomic perspective," Finance Research Letters, Elsevier, vol. 36(C).
    3. KAMGNA, Severin Yves & Ndambendia, Houdou, 2008. "Excès de liquidité systémique et effectivité de la politique monétaire : cas des pays de la CEMAC [Excess liquidity and monetary policy effectiveness: The case of CEMAC countries]," MPRA Paper 9599, University Library of Munich, Germany.
    4. Ms. Corinne C Delechat & Ms. Camila Henao Arbelaez & Ms. Priscilla S Muthoora & Svetlana Vtyurina, 2012. "The Determinants of Banks' Liquidity Buffers in Central America," IMF Working Papers 2012/301, International Monetary Fund.
    5. Keyra Primus, 2013. "'Excess Reserves, Monetary Policy and Financial Volatility," Centre for Growth and Business Cycle Research Discussion Paper Series 183, Economics, The University of Manchester.
    6. Tsen, Wong Hock, 2011. "The real exchange rate determination: An empirical investigation," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 800-811, October.
    7. Nguyen, Vu Hong Thai & Boateng, Agyenim, 2013. "The impact of excess reserves beyond precautionary levels on Bank Lending Channels in China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 358-377.
    8. Primus, Keyra, 2013. "Excess Reserves, Monetary Policy and Financial Volatility," MPRA Paper 51670, University Library of Munich, Germany.
    9. Pesaran, M. Hashem & Schuermann, Til & Treutler, Bjorn-Jakob & Weiner, Scott M., 2006. "Macroeconomic Dynamics and Credit Risk: A Global Perspective," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(5), pages 1211-1261, August.
    10. Jérôme Héricourt & Iuliana Matei, 2007. "Transmission de la politique monétaire dans les pays d'E urope centrale et orientale : que savons-nous vraiment ?," Economie & Prévision, La Documentation Française, vol. 0(4), pages 221-238.
    11. Tan, Madeleine Sui-Lay, 2016. "Policy coordination among the ASEAN-5: A global VAR analysis," Journal of Asian Economics, Elsevier, vol. 44(C), pages 20-40.
    12. Alexandros Kontonikas & Alexandros Kostakis, 2013. "On Monetary Policy and Stock Market Anomalies," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 40(7-8), pages 1009-1042, September.
    13. François-Éric Racicot & Raymond Théoret, 2022. "Tracking market and non-traditional sources of risks in procyclical and countercyclical hedge fund strategies under extreme scenarios: a nonlinear VAR approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-56, December.
    14. Wang, Xunxiao & Wu, Chongfeng, 2018. "Asymmetric volatility spillovers between crude oil and international financial markets," Energy Economics, Elsevier, vol. 74(C), pages 592-604.
    15. Kim, Hyeongwoo & Thompson, Henry, 2014. "Wages in a factor proportions model with energy input," Economic Modelling, Elsevier, vol. 36(C), pages 495-501.
    16. Espinosa Acuña, Óscar A. & Vaca González, Paola A. & Avila Forero, Raúl A., 2013. "Elasticidades de demanda por electricidad e impactos macroecon_omicos del precio de la energía eléctrica en Colombia || Elasticity of Electricity Demand and Macroeconomics Impacts of Electricity Price," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 16(1), pages 216-249, December.
    17. Ricco, Giovanni & Callegari, Giovanni & Cimadomo, Jacopo, 2014. "Signals from the Government: Policy Uncertainty and the Transmission of Fiscal Shocks," MPRA Paper 56136, University Library of Munich, Germany.
    18. Erdal Demirhan & Banu Demirhan, 2015. "The Dynamic Effect of ExchangeRate Volatility on Turkish Exports: Parsimonious Error-Correction Model Approach," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(4), pages 429-451, September.
    19. Mounir Ben Mbarek & Racha Khairallah & Rochdi Feki, 2015. "Causality relationships between renewable energy, nuclear energy and economic growth in France," Environment Systems and Decisions, Springer, vol. 35(1), pages 133-142, March.
    20. Mohammad Reza Farzanegan & Sajjad Faraji Dizaji, 2014. "Political Institutions and Government Spending Behavior in Iran," MAGKS Papers on Economics 201403, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

    More about this item

    Keywords

    excess liquidity; financial programming; monetary policy; Guyana;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:53126. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.