How Useful is Monetary Econometrics in Low-Income Countries? T+L3104he Case of Money Demand and the Multipliers in Rwanda
IMF Working Papers, September 1, 2005
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Bibliographic details
- Authors: Gabriel Di Bella, David Hauner
- Published: September 1, 2005
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451861976.001
Summary and purpose
- Revisits the usefulness of econometric monetary analysis in low-income countries using Rwanda as a case study.
- Rwanda chosen because of its floating exchange rate and reliance on indirect monetary policy instruments, alongside typical data and institutional shortcomings.
Main findings
- Overall findings are generally encouraging for the use of econometric models for monetary analysis in low-income countries.
- Time series and structural models of the money multiplier and money demand yield results that are:
- Statistically reasonable.
- Economically reasonable.
- Useful to inform policymaking, notwithstanding substantial qualifications.
Methods and topical focus
- Empirical approaches include time series and structural econometric models applied to:
- Money multiplier.
- Money demand.
- Subject areas covered: Banking, Currencies, Demand for money, Exchange rates, Financial markets, Foreign exchange, Monetary base, Money, Money markets.
Policy relevance and implications
- Econometric models can provide actionable insights for monetary policy in low-income countries even when data and institutional constraints are present.
- Results support the informative value of econometric analysis for central banks that operate with floating exchange rates and indirect instruments.