{
  "title": "Monetary Policy Transmission in the Eastern Caribbean Currency Union",
  "publication": "IMF Working Papers, March 29, 2018",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2018/03/29/monetary-policy-transmission-in-the-eastern-caribbean-currency-union-45742",
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  "summary": "This paper empirically investigates international and domestic monetary policy transmission mechanisms in the Eastern Caribbean Currency Union (ECCU). We assess interest rate pass-through of both the U.S.",
  "sections": [
    {
      "heading": "Summary and main findings",
      "content": "- The paper empirically investigates international and domestic monetary policy transmission mechanisms in the Eastern Caribbean Currency Union (ECCU).\n- It assesses interest rate pass-through of both the U.S. policy rate and the ECCU minimum saving deposit rate (MSR) into domestic interest rates through the interest rate channel.\n- While economic theory suggests that the international pass-through should be high in small open economies with fixed exchange rates and open capital accounts, the authors' regression analysis points to a low long-run pass-through coefficient of the U.S. interest rate.\n- The domestic transmission channel is found to operate through changes in the MSR.\n- The results hold for different interest rates (deposit and lending) and are supported by survey-based findings."
    },
    {
      "heading": "Methodology and evidence",
      "content": "- Empirical approach: regression analysis (details and specification provided in the working paper).\n- Interest rate instruments evaluated: U.S. policy rate and ECCU minimum saving deposit rate (MSR).\n- Outcome variables: domestic interest rates (deposit and lending rates).\n- Supporting evidence: survey-based findings corroborate regression results."
    },
    {
      "heading": "Policy-relevant implications",
      "content": "- International monetary policy shocks (U.S. policy rate) exhibit low long-run pass-through into ECCU domestic interest rates despite theoretical expectations for high pass-through in small open, fixed-exchange-rate economies with open capital accounts.\n- Domestic policy adjustments via the MSR are an effective channel for transmitting monetary policy to domestic deposit and lending rates.\n\n---\n\n Content in this bundle\n\n- Monetary Policy Transmission in Eastern Caribbean Currency Union, WP/18/70, March 2018\n  - Monetary Policy Transmission in Eastern Caribbean Currency Union, WP/18/70, March 2018 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Monetary Policy Transmission in Eastern Caribbean Currency Union, WP/18/70, March 2018 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2018/03/29/monetary-policy-transmission-in-the-eastern-caribbean-currency-union-45742"
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    "Authors: Alla Myrvoda, Julien Reynaud",
    "Published: March 29, 2018",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484348291.001",
    "The paper empirically investigates international and domestic monetary policy transmission mechanisms in the Eastern Caribbean Currency Union (ECCU).",
    "It assesses interest rate pass-through of both the U.S. policy rate and the ECCU minimum saving deposit rate (MSR) into domestic interest rates through the interest rate channel.",
    "While economic theory suggests that the international pass-through should be high in small open economies with fixed exchange rates and open capital accounts, the authors' regression analysis points to a low long-run pass-through coefficient of the U.S. interest rate.",
    "The domestic transmission channel is found to operate through changes in the MSR.",
    "The results hold for different interest rates (deposit and lending) and are supported by survey-based findings.",
    "Empirical approach: regression analysis (details and specification provided in the working paper).",
    "Interest rate instruments evaluated: U.S. policy rate and ECCU minimum saving deposit rate (MSR).",
    "Outcome variables: domestic interest rates (deposit and lending rates).",
    "Supporting evidence: survey-based findings corroborate regression results.",
    "International monetary policy shocks (U.S. policy rate) exhibit low long-run pass-through into ECCU domestic interest rates despite theoretical expectations for high pass-through in small open, fixed-exchange-rate economies with open capital accounts.",
    "Domestic policy adjustments via the MSR are an effective channel for transmitting monetary policy to domestic deposit and lending rates.",
    "**Monetary Policy Transmission in Eastern Caribbean Currency Union, WP/18/70, March 2018**"
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