The Transmission Mechanism for Monetary Policy in Developing Countries
May 1, 1990
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Summary
In many developing countries the financial system is characterized by the absence of organized markets for securities and equities, by capital controls, and by legal ceilings on bank borrowing and lending rates, a situation which gives rise to parallel markets for foreign exchange and informal loan markets. This paper analyzes how changes in monetary policy instruments (bank credit, administered interest rates, required reserve ratios, and intervention in the parallel exchange market) are transmitted to domestic aggregate demand in a financially-repressed economy. Such an analysis is necessary to understand how the move to a more market-oriented system would affect the economy in the short run.
Subject: Bank credit, Commercial banks, Currency markets, Loans, Monetary policy instruments
Keywords: foreign exchange, interest rate, monetary policy, WP
Pages:
30
Volume:
1990
DOI:
Issue:
047
Series:
Working Paper No. 1990/047
Stock No:
WPIEA0471990
ISBN:
9781451972801
ISSN:
1018-5941
Notes
Also published in Staff Papers, Vol. 38, No. 1, March 1991.
