Measuring and Mending Monetary Policy Effectiveness Under Capital Account Restrictions: Lessons from Mauritania

Author/Editor:

Robert Blotevogel

Publication Date:

March 27, 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:

I propose a new approach to identifying exogenous monetary policy shocks in low-income countries with capital account restrictions. In the case of Mauritania, a domestic repatriation requirement is the key institutional characteristic that allows me to establish exogeneity. Unlike in advanced countries, I find no evidence for a statistically significant impact of exogenous monetary policy shocks on bank lending. Using a unique bank-level dataset on monthly balance sheets of six Mauritanian banks over the period 2006–11, I estimate structural vector autoregressions and two-stage least square panel models to demonstrate the ineffectiveness of monetary policy. Finally, I discuss how a reduction in banks’ loan concentration ratios and improvements in the liquidity management framework could make monetary stimuli more effective.

Series:

Working Paper No. 2013/077

Subject:

Agroindustries Bank credit Banking Credit Economic sectors Exports Financial institutions International trade Loans Money

English

Publication Date:

March 27, 2013

ISBN/ISSN:

9781484328682/1018-5941

Stock No:

WPIEA2013077

Pages:

35

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