Is Monetary Policy Effective When Credit Is Low?, Issues 2008-2288

Front Cover
International Monetary Fund, Dec 1, 2008 - Business & Economics - 17 pages
Monetary policy, at least in part, operates through both an interest rate and credit channel. The question arises, therefore, whether monetary policy is a less potent a device in affecting output and inflation in countries that have low levels of credit and where investment and consumption are not financed by borrowing in local currency. This paper employs a Panel Vector Auto Regression approach to examine the empirical evidence in a broad sample of emerging market countries. The data suggests that the effectiveness of changes in policy interest rates in influencing the path of inflation appear to be unrelated to the level of credit and that, instead, the willingness to allow exchange rate flexibility is a far more important determining factor.

From inside the book

What people are saying - Write a review

We haven't found any reviews in the usual places.

Contents

Background
3
Impulse Response Function of a Shock to Interest Rates
10
Monetary Policy Regimes
16
Copyright

Other editions - View all

Common terms and phrases

Bibliographic information