How Effective is Monetary Transmission in Low-Income Countries? A Survey of the Empirical Evidence

49 Pages Posted: 9 Aug 2012

See all articles by Prachi Mishra

Prachi Mishra

International Monetary Fund (IMF) - Research Department

Peter J. Montiel

Williams College - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: June 2012

Abstract

This paper surveys the evidence on the effectiveness of monetary transmission in low-income countries. It is hard to come away from this review with much confidence in the strength of monetary transmission in such countries. We distinguish between the "facts on the ground" and "methodological deficiencies" interpretations of the absence of evidence for strong monetary transmission. We suspect that "facts on the ground" are an important part of the story. If this conjecture is correct, the stabilization challenge in developing countries is acute indeed, and identifying the means of enhancing the effectiveness of monetary policy in such countries is an important challenge.

Keywords: Exchange Rate, Interest Rate, Banks, Institutions, Developing Countries, Eastern Europe, Latin America, Low-income Developing Countries, Middle East And Central Asia, Monetary Transmission Mechanism, Transition Economies, Monetary Policy

JEL Classification: O11, O16

Suggested Citation

Mishra, Prachi and Montiel, Peter J., How Effective is Monetary Transmission in Low-Income Countries? A Survey of the Empirical Evidence (June 2012). IMF Working Paper No. 12/143. Available at SSRN: https://ssrn.com/abstract=2127036

Prachi Mishra (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

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Washington, DC 20431
United States

Peter J. Montiel

Williams College - Department of Economics ( email )

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Office: Fernald 14
Williamstown, MA 01267
United States
413-597-2103 (Phone)
413-597-4045 (Fax)

HOME PAGE: http://www.williams.edu/Economics/faculty/montiel.htm

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