Monetization in Low- and Middle-Income Countries

25 Pages Posted: 10 Aug 2012

See all articles by Cameron McLoughlin

Cameron McLoughlin

Banque de France

Noriaki Kinoshita

International Monetary Fund (IMF)

Date Written: June 2012


The degree of an economy's monetization, which has an important implication on economic growth, can be affected by the conduct of monetary policy, financial sector reform, and episodes of financial crises. The paper finds that monetization -- measured by the ratio of broad money to nominal GDP -- in low- to middle-income countries is significantly correlated with per-capita GDP, real interest rates, and financial sector reform. It suggests that maintaining an upward momentum in monetization can be an important policy objective, particularly for low-income countries, and that monetary and financial sector policies need to be conducive to enhancing monetization.

Keywords: Monetization, Financial Sector Reform, Low- And Middle-income Countries, financial sector, statistics, financial reform, deposit rate, financial sector development, deposit rates, cointegration, international financial statistics, financial statistics, time series, financial assets, mean group, financial repression, descriptive statistics, standard deviation, survey, equation, statistic, econometrics, correlations, financial reforms, mean group estimation, explanatory power, financial liberalization, regression analysis, stock market development, portfolio investment, financial sector liberalization, hedges, hedge, standard errors, pooled time series, correlation, estimation technique, finan

JEL Classification: E41, E52

Suggested Citation

McLoughlin, Cameron and Kinoshita, Noriaki, Monetization in Low- and Middle-Income Countries (June 2012). IMF Working Paper No. 12/160, Available at SSRN:

Cameron McLoughlin (Contact Author)

Banque de France ( email )


Noriaki Kinoshita

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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