Making Monetary Policy More Effective: The Case of the Democratic Republic of the Congo

Felix Fischer, Charlotte Lundgren and Samir Jahjah

No 2013/226, IMF Working Papers from International Monetary Fund

Abstract: The paper looks at the challenges of conducting monetary policy in a context of high dollarization of the banking system and weak institutions in the Democratic Republic of the Congo. The empirical analysis confirms the limited effectiveness of the Central Bank of Congo in controlling inflation, despite a rapid policy response to inflation shocks. Options available to enhance the effectiveness of monetary policy are limited. After exploring the pros and cons of different exchange regimes we conclude that strengthening the current monetary policy framework remains the first-best option, given the country’s exposure to frequent terms-of-trade shocks.

Keywords: WP; foreign currency; transmission mechanism; interest rate; unit of account; banking system; broad money; currency board; dollarization measure; money demand; dollarization; monetary policy; inflation; exchange rate regime; dedollarization; financial deepening.; bcc monetary policy intervention; Currencies; Exchange rates; Central bank policy rate; Sub-Saharan Africa; Global (search for similar items in EconPapers)
Pages: 31
Date: 2013-11-05
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Citations: View citations in EconPapers (6)

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