Measuring and Mending Monetary Policy Effectiveness Under Capital Account Restrictions

Download or read book Measuring and Mending Monetary Policy Effectiveness Under Capital Account Restrictions written by Mr.Robert Blotevogel and published by International Monetary Fund. This book was released on 2013-03-27 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: I propose a new approach to identifying exogenous monetary policy shocks in low-income countries with capital account restrictions. In the case of Mauritania, a domestic repatriation requirement is the key institutional characteristic that allows me to establish exogeneity. Unlike in advanced countries, I find no evidence for a statistically significant impact of exogenous monetary policy shocks on bank lending. Using a unique bank-level dataset on monthly balance sheets of six Mauritanian banks over the period 2006–11, I estimate structural vector autoregressions and two-stage least square panel models to demonstrate the ineffectiveness of monetary policy. Finally, I discuss how a reduction in banks’ loan concentration ratios and improvements in the liquidity management framework could make monetary stimuli more effective.