Making Monetary Policy More Effective: The Case of the Democratic Republic of the Congo
November 5, 2013
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Summary
The paper looks at the challenges of conducting monetary policy in a context of high dollarization of the banking system and weak institutions in the Democratic Republic of the Congo. The empirical analysis confirms the limited effectiveness of the Central Bank of Congo in controlling inflation, despite a rapid policy response to inflation shocks. Options available to enhance the effectiveness of monetary policy are limited. After exploring the pros and cons of different exchange regimes we conclude that strengthening the current monetary policy framework remains the first-best option, given the country’s exposure to frequent terms-of-trade shocks.
Subject: Central bank policy rate, Currencies, Dollarization, Exchange rates, Financial services, Foreign exchange, Inflation, Monetary policy, Money, Prices
Keywords: banking system, bcc monetary policy intervention, broad money, Central bank policy rate, Currencies, currency board, dedollarization, dollarization, dollarization measure, exchange rate regime, Exchange rates, financial deepening., foreign currency, Global, inflation, interest rate, monetary policy, money demand, Sub-Saharan Africa, transmission mechanism, unit of account, WP
Pages:
31
Volume:
2013
DOI:
Issue:
226
Series:
Working Paper No. 2013/226
Stock No:
WPIEA2013226
ISBN:
9781475516371
ISSN:
1018-5941
Notes
Full Text also available in French
