Market-Based Systems of Monetary Control in Developing Countries: Operating Procedures and Related Issues
IMF Working Papers, April 1, 1991
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- Market-Based Systems of Monetary Control in Developing Countries: Operating Procedures and Related Issues
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Bibliographic details
- Authors: Chorng-Huey Wong
- Published: April 1, 1991
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451845877.001
Summary and Scope
- This paper reviews issues in the development of a market-based system of monetary control in developing countries.
- Focus areas:
- Appropriate sequencing of financial reform to facilitate the transition toward a market-based system.
- Measures required to strengthen the effectiveness of market-based operations.
- Assessment of the effects of financial reform on the demand for money function.
- Discussion of implications for policy formulation and implementation.
Major Themes and Analytical Focus
- Transition toward a market-based monetary control framework in developing countries.
- Sequencing of financial reforms to support market-based operations.
- Strengthening operational effectiveness of:
- Open market operations
- Treasury bill market and treasury bill auctions
- Repurchase market
- Interaction between financial market development and monetary aggregates:
- Monetary base
- Net claim
- Excess reserves
- Demand for money
- Consideration of opportunity cost and interest rate behavior in market conditions.
Key Findings and Assessments (as presented)
- The paper assesses how financial reform affects the demand for money function.
- The paper evaluates measures required to strengthen market-based operations, including sound treasury bill market structures and repurchase market development.
- Emphasis on policy implications arising from changing financial market structures and the operational needs of central banks.
Policy Implications and Recommendations (as presented)
- Sequence financial reforms to facilitate effective transition to market-based monetary control.
- Strengthen market infrastructure to improve the conduct and effectiveness of open market operations.
- Develop government securities markets (treasury bills and bonds) and related auction mechanisms to support monetary control.
- Address implications for policy formulation and implementation stemming from changing demand for money dynamics.
Subject Areas and Keywords (as listed)
- Subject: Banking, Central banks, Demand for money, Financial institutions, Government securities, Monetary base, Money, Open market operations, Treasury bills and bonds
- Keywords: Asia and Pacific, central bank, Demand for money, excess reserves, financial market development, Government securities, interest rate, market, market condition, Monetary base, net claim, Open market operations, opportunity cost, repurchase market, sound treasury bill market, treasury bill, treasury bill auction, treasury bill market, Treasury bills and bonds, WP