Monetary Transmission in Low Income Countries

Author/Editor:

Peter J Montiel ; Antonio Spilimbergo ; Prachi Mishra

Publication Date:

October 1, 2010

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:

This paper reviews monetary transmission mechanisms in low-income countries (LICs) to identify aspects of the channels that may operate differently in LICs relative to advanced and emerging economies. Given the weak institutional frameworks, reduced role of securities markets, imperfect competition in the banking sector and the resulting high cost of bank lending to private firms, the traditional channels (interest rate, bank lending, and asset price) are impaired in LICs. The exchange rate channel is also undermined by central bank intervention in the foreign exchange market. These conclusions are supported by review of the institutional frameworks, statistical analysis, and previous literature.

Series:

Working Paper No. 10/223

Subject:

English

Publication Date:

October 1, 2010

ISBN/ISSN:

9781455208883/1018-5941

Stock No:

WPIEA2010223

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

42

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