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

Posted: 13 Oct 2015

See all articles by Prachi Mishra

Prachi Mishra

International Monetary Fund (IMF) - Research Department

Peter J. Montiel

Williams College - Department of Economics

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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: Monetary policy, Exchange rate, Interest rate, Banks, Institutions, Developing countries

JEL Classification: E5, 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. Economic Systems, Vol. 37, No. 2, 2013. Available at SSRN: https://ssrn.com/abstract=2673492

Prachi Mishra

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

700 19th Street NW
Washington, DC 20431
United States

Peter J. Montiel (Contact Author)

Williams College - Department of Economics ( email )

Fernald House
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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