Making Monetary Policy More Effective: The Case of the Democratic Republic of the Congo

Author/Editor:

Felix Fischer ; Charlotte J. Lundgren ; Samir Jahjah

Publication Date:

November 5, 2013

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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.

Series:

Working Paper No. 2013/226

Subject:

Central bank policy rate Currencies Dollarization Exchange rates Financial services Foreign exchange Inflation Monetary policy Money Prices

Notes:

Full Text also available in French

English

Publication Date:

November 5, 2013

ISBN/ISSN:

9781475516371/1018-5941

Stock No:

WPIEA2013226

Pages:

31

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