Lost in Transmission? The Effectiveness of Monetary Policy Transmission Channels in the GCC Countries

July 1, 2012

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 empirically investigates the effectiveness of monetary policy transmission in the Gulf Cooperation Council (GCC) countries using a structural vector autoregressive model. The results indicate that the interest rate and bank lending channels are relatively effective in influencing non-hydrocarbon output and consumer prices, while the exchange rate channel does not appear to play an important role as a monetary transmission mechanism because of the pegged exchange rate regimes. The empirical analysis suggests that policy measures and structural reforms - strengthening financial intermediation and facilitating the development of liquid domestic capital markets - would advance the effectiveness of monetary transmission mechanisms in the GCC countries.

Subject: Bank credit, Econometric analysis, Exchange rate arrangements, Exchange rates, Foreign exchange, Monetary policy, Monetary transmission mechanism, Money, Structural vector autoregression

Keywords: Bank credit, contractionary monetary policy, credit channel, Exchange rate arrangements, exchange rate regime, Exchange rates, GCC aggregate, GCC country, GCC economy, Global, inflation, interest rate, monetary policy shock, Monetary policy transmission, Monetary transmission mechanism, structural VAR, Structural vector autoregression, WP

Pages:
35
Volume:
2012
DOI:
https://doi.org/10.5089/9781475505399.001
Issue:
191
Series:
Working Paper No. 2012/191
Stock No:
WPIEA2012191
ISBN:
9781475505399
ISSN:
1018-5941

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