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The Transmission Mechanism for Monetary Policy in Developing Countries

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  • Peter J. Montiel

    (International Monetary Fund)

Abstract

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 that gives rise to parallel markets for foreign exchange and informal loan markets. This paper analyzes how changes in monetary policy instruments 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.

Suggested Citation

  • Peter J. Montiel, 1991. "The Transmission Mechanism for Monetary Policy in Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 38(1), pages 83-108, March.
    • Handle: RePEc:pal:imfstp:v:38:y:1991:i:1:p:83-108
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    Cited by:

    1. Al-Mashat Rania & Billmeier Andreas, 2008. "The Monetary Transmission Mechanism in Egypt," Review of Middle East Economics and Finance, De Gruyter, vol. 4(3), pages 32-82, September.
    2. Gustavo Junca, 2006. "Modelo de zonas objetivo para la tasa de interés de corto plazo," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, December.
    3. Sanchez-Fung, Jose R., 2008. "The day-to-day interbank market, volatility, and central bank intervention in a developing economy," Economics Discussion Papers 2008-2, School of Economics, Kingston University London.
    4. Isard, Peter & Mathieson, Donald J. & Rojas-Suarez, Liliana, 1996. "A framework for the analysis of financial reforms and the cost of official safety nets," Journal of Development Economics, Elsevier, vol. 50(1), pages 25-79, June.
    5. José J. Sidaoui & Manuel Ramos-Francia, 2008. "The monetary transmission mechanism in Mexico: recent developments," BIS Papers chapters, in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 363-394, Bank for International Settlements.
    6. Sanchez-Fung Jose R., 2003. "Monetary Policy Reaction Dynamics In A Developing Economy: Evidence For The Dominican Republic," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 3(1).
    7. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777.
    8. Simatele, Munacinga C H, 2004. "Financial sector reforms and monetary policy reforms in Zambia," MPRA Paper 21575, University Library of Munich, Germany.
    9. Jose Sanchez-fung, 2005. "Estimating a monetary policy reaction function for the dominican republic," International Economic Journal, Taylor & Francis Journals, vol. 19(4), pages 563-577.
    10. ismail, abdul & smith, peter, 1993. "Monetary Policy and Commercial Banks: An Overview," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 27, pages 29-55.
    11. International Monetary Fund, 1991. "Financial Sector Reforms and Monetary Policy," IMF Working Papers 1991/127, International Monetary Fund.

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