The Transmission Mechanism for Monetary Policy in Developing Countries

May 1, 1990

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Format: Chicago

Peter J Montiel. The Transmission Mechanism for Monetary Policy in Developing Countries, (USA: International Monetary Fund, 1990) accessed September 27, 2024

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

In many developing countries the financial system is characterized by the absence of organized markets for securities and equities, by capital controls, and by legal ceilings on bank borrowing and lending rates, a situation which gives rise to parallel markets for foreign exchange and informal loan markets. This paper analyzes how changes in monetary policy instruments (bank credit, administered interest rates, required reserve ratios, and intervention in the parallel exchange market) are transmitted to domestic aggregate demand in a financially-repressed economy. Such an analysis is necessary to understand how the move to a more market-oriented system would affect the economy in the short run.

Subject: Bank credit, Commercial banks, Currency markets, Loans, Monetary policy instruments

Keywords: Foreign exchange, Interest rate, Monetary policy, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1990/047
Stock No:

WPIEA0471990
ISBN:

9781451972801
ISSN:

1018-5941

Notes

Also published in Staff Papers, Vol. 38, No. 1, March 1991.

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